B-13241, NOVEMBER 4, 1940, 20 COMP. GEN. 242

B-13241, NOVEMBER 4, 1940, 20 COMP. GEN. 242

CONTRACTS - NATIONAL DEFENSE HOUSING PROJECTS - EXTENT OF AUTHORITY TO CONTRACT ON COST-PLUS-A-FIXED-FEE BASIS THE PROVISO OF SECTION 201 OF THE SECOND SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1941, WHICH EXTENDS "THE AUTHORITY OF EXISTING LAW FOR THE NEGOTIATION OF COST-PLUS-A-FIXED-FEE CONTRACTS * * * TO HOUSING PROJECTS FOR WHICH FUNDS MAY BE MADE AVAILABLE TO THE WAR AND NAVY DEPARTMENTS," AUTHORIZES THE NEGOTIATION OF COST-PLUS-A-FIXED FEE CONTRACTS FOR NATIONAL DEFENSE HOUSING PROJECTS WHETHER THE FUNDS THEREFOR BE MADE AVAILABLE TO THOSE DEPARTMENTS UNDER THE SAID ACT, OR UNDER TITLE II OF THE ACT OF JUNE 28, 1940, OR OTHER LEGISLATION.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, NOVEMBER 4, 1940:

I HAVE YOUR LETTER OF OCTOBER 30, 1940, AS FOLLOWS:

THE U.S. HOUSING AUTHORITY, UNDER DATE OF AUGUST 12, 1940, REPORTED THAT PURSUANT TO TITLE II OF PUBLIC, NO. 671--- 76TH CONGRESS APPROVED JUNE 28, 1940, THE PRESIDENT HAD APPROVED NATIONAL DEFENSE HOUSING PROJECTS FOR THE DEVELOPMENT BY THE NAVY DEPARTMENT WITH FUNDS TRANSFERRED BY THE U.S. HOUSING AUTHORITY AT CERTAIN SPECIFIED PLACES.

THE PROJECTS, THUS APPROVED, INCLUDED THE CONSTRUCTION OF 400 UNITS AT THE CANAL ZONE. THE FUNDS WERE, IT IS UNDERSTOOD, MADE AVAILABLE THROUGH THE FLOATING OF A BOND ISSUE IN CONFORMITY WITH THE ORGANIC ACT ESTABLISHING THE U.S. HOUSING AUTHORITY. THE SUM OF $1,600,000 TRANSFERRED FROM THE HOUSING AUTHORITY TO THE NAVY FOR THIS PURPOSE, WAS CREDITED TO THE " NAVAL WORKING ND.'

IN ADDITION TO THESE 400 UNITS, FUNDS HAVE BEEN ALLOCATED TO THE NAVY DEPARTMENT BY THE PRESIDENT FOR AN ADDITIONAL 1,000 UNITS AT THE CANAL ZONE, WHICH FUNDS WERE APPROPRIATED BY SECTION 201 OF THE SECOND SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1941, APPROVED SEPTEMBER 9, 1940, PUBLIC, NO. 781--- 76TH CONGRESS. SAID SECTION CONTAINS THE FOLLOWING PROVISION:

"THAT THE AUTHORITY OF EXISTING LAW FOR THE NEGOTIATION OF COST PLUS-A- FIXED-FEE CONTRACTS SHALL BE APPLICABLE TO HOUSING PROJECTS FOR WHICH FUNDS MAY BE MADE AVAILABLE TO THE WAR AND NAVY DEPARTMENTS OR THE MARITIME COMMISSION.'

IF THESE 1,000 UNITS AND THE 400 UNITS FIRST ABOVE MENTIONED ARE CONSTRUCTED UNDER NEGOTIATED FEE CONTRACT, IT IS BELIEVED THAT CONSIDERABLE SAVINGS TO THE UNITED STATES WILL RESULT. OTHERWISE, TWO DISTINCT CONSTRUCTION ORGANIZATIONS IN THE CANAL ZONE WOULD BE NECESSARY WITH A CORRESPONDING DUPLICATION IN OVERHEAD, AUGMENTED BY THE FACT THAT LABOR COMPLICATIONS WOULD UNDOUBTEDLY ARISE WHICH, PARTICULARLY IN THE CASE OF A COMPETITIVE CONTRACT, MIGHT INVOLVE CONSIDERABLE DELAY IN CONSTRUCTION.

THE LABOR MARKET FOR WORK IN THE CANAL ZONE AT THE PRESENT TIME WOULD PRESENT SERIOUS DIFFICULTIES TO A CONTRACTOR ENDEAVORING TO BID ON A COMPETITIVE CONTRACT. THERE WOULD BE COMPETITION IN LABOR BETWEEN THOSE EMPLOYED ON NEGOTIATED FEE CONTRACTS AND THOSE EMPLOYED ON COMPETITIVE CONTRACTS. ANY COMPETITIVE BIDDER WITH KNOWLEDGE OF THIS SITUATION WOULD DOUBTLESS ALLOW SUCH A HIGH CONTINGENT ALLOWANCE IN HIS BID TO PROTECT HIMSELF AGAINST UNFORESEEN LABOR DIFFICULTIES AS TO MAKE A COMPETITIVE BID EXTREMELY HIGH AND UNECONOMICAL FROM THE STANDPOINT OF THE GOVERNMENT.

FOR THE REASONS ABOVE SET FORTH, IT IS BELIEVED THAT THE PUBLIC INTERESTS WOULD BE BEST SERVED BY CONSTRUCTING ALL OF THE NAVAL HOUSING UNITS AT THE CANAL ZONE BY MEANS OF NEGOTIATED FEE CONTRACTS.

PUBLIC ACT, NO. 849--- 76TH CONGRESS, APPROVED OCTOBER 14, 1940, "TO EXPEDITE THE PROVISION OF HOUSING IN CONNECTION WITH NATIONAL DEFENSE" AUTHORIZES, BY SECTION 1, THE FEDERAL WORKS ADMINISTRATOR TO USE A COST- PLUS-A-FIXED-FEE FORM OF CONTRACT IN CARRYING OUT THE ACT. SECTION 5 PERMITS THE TRANSFER TO THE ADMINISTRATOR BY ANY FEDERAL AGENCY OF FUNDS FOR NATIONAL DEFENSE HOUSING PROJECTS; AND SECTION 8 AUTHORIZES THE ADMINISTRATOR TO UTILIZE OTHER FEDERAL AGENCIES AND MAKES AVAILABLE FOR TRANSFER TO ANY SUCH AGENCIES THE FUNDS APPROPRIATED PURSUANT TO SAID ACT.

THESE SECTIONS REFER IN EACH CASE SPECIFICALLY TO THE ACT OF OCTOBER 14, 1940, AND TO THE FUNDS MADE AVAILABLE THROUGH ITS PROVISIONS. IT IS NOT ENTIRELY CLEAR, THEREFORE, THAT THE AUTHORITY FOR THE NEGOTIATED FEE CONTRACT GRANTED BY SECTION 1 THEREOF, AND THE VARIOUS OTHER ACTS AUTHORIZING THE CONSTRUCTION OF HOUSING FOR NATIONAL DEFENSE, IS APPLICABLE TO THE FUNDS TRANSFERRED BY THE U.S. HOUSING AUTHORITY ON AUGUST 12, 1940, AND OBTAINED THROUGH A BOND ISSUE RATHER THAN BY DIRECT APPROPRIATION OF CONGRESS.

IN ORDER THAT NO QUESTION MAY BE RAISED AS TO THE LEGALITY OF A CONTRACT IF ENTERED INTO, YOUR DECISION IS REQUESTED AS TO WHETHER OBJECTION WOULD BE INTERPOSED BY THE ACCOUNTING OFFICERS TO A NEGOTIATED FEE CONTRACT OR CONTRACTS FOR THE CONSTRUCTION OF THE NAVAL HOUSING UNITS IN THE CANAL ZONE FOR NATIONAL DEFENSE PURPOSES IRRESPECTIVE OF THE SOURCE OF THE FUNDS FROM WHICH THE CONSTRUCTION COSTS WOULD BE DEFRAYED.

AS IT IS A MATTER OF EXTREME URGENCY TO UNDERTAKE THE CONSTRUCTION OF ALL OF THE NATIONAL DEFENSE HOUSING PROJECTS IN THE CANAL ZONE AT THE EARLIEST PRACTICABLE DATE, IT IS REQUESTED THAT DECISION BE RENDERED WITH THE GREATEST POSSIBLE DISPATCH.

TITLE II OF PUBLIC NO. 671, APPROVED JUNE 28, 1940, IS IN PART AS FOLLOWS:

SEC. 201. IN CONNECTION WITH THE NATIONAL DEFENSE PROGRAM, THE NAVY AND WAR DEPARTMENTS AND THE UNITED STATES HOUSING AUTHORITY ARE HEREBY AUTHORIZED TO COOPERATE IN MAKING NECESSARY HOUSING AVAILABLE FOR PERSONS ENGAGED IN NATIONAL DEFENSE ACTIVITIES, AS HEREINAFTER PROVIDED. * * *

SEC. 202. (A) PROJECTS MAY BE INITIATED HEREUNDER BY THE NAVY OR WAR DEPARTMENT TO PROVIDE DWELLINGS ON OR NEAR NAVAL OR MILITARY RESERVATIONS, POSTS OR BASES FOR RENTAL TO THE ENLISTED MEN AND EMPLOYEES OF THE NAVY AND WAR DEPARTMENTS DESCRIBED IN SECTION 201. SUCH PROJECTS SHALL BE DEVELOPED BY THE NAVY OR WAR DEPARTMENT OR BY THE AUTHORITY, WHICHEVER THE PRESIDENT DETERMINES IS BETTER SUITED TO THE FULFILLMENT OF THE PURPOSES OF THIS TITLE WITH RESPECT TO ANY PARTICULAR PROJECT. IF THE DEVELOPMENT OF SUCH PROJECT IS TO BE UNDERTAKEN BY THE NAVY OR WAR DEPARTMENT, THE AUTHORITY, IS AUTHORIZED TO AID THE DEVELOPMENT OF THE PROJECT BY FURNISHING TECHNICAL ASSISTANCE AND BY TRANSFERRING TO SUCH DEPARTMENT THE FUNDS NECESSARY FOR THE DEVELOPMENT OF THE PROJECT. * * *

SECTION 201 OF PUBLIC NO. 781--- SECOND SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1941--- APPROVED SEPTEMBER 9, 1940, IS AS FOLLOWS:

SEC. 201. TO THE PRESIDENT FOR ALLOCATION TO THE WAR DEPARTMENT AND THE NAVY DEPARTMENT FOR THE ACQUISITION OF NECESSARY LAND AND THE THE CONSTRUCTION OF HOUSING UNITS, INCLUDING NECESSARY UTILITIES, ROADS, WALKS, AND ACCESSORIES, AT LOCATIONS ON OR NEAR MILITARY OR NAVAL ESTABLISHMENTS, NOW IN EXISTENCE OR TO BE BUILT, OR NEAR PRIVATELY OWNED INDUSTRIAL PLANTS ENGAGED IN MILITARY OR NAVAL ACTIVITIES, WHICH FOR THE PURPOSES OF THIS ACT SHALL BE CONSTRUED TO INCLUDE ACTIVITIES OF THE MARITIME COMMISSION, WHERE THE SECRETARY OF WAR, THE SECRETARY OF THE NAVY, OR THE CHAIRMAN OF THE MARITIME COMMISSION SHALL CERTIFY THAT SUCH HOUSING IS IMPORTANT FOR PURPOSES UNDER THEIR RESPECTIVE JURISDICTION AND NECESSARY TO THE NATIONAL DEFENSE PROGRAM, $100,000,000: PROVIDED, THAT THE AVERAGE UNIT COST OF SUCH HOUSING PROJECTS, INCLUDING ACQUISITION OF LAND AND THE INSTALLATION OF NECESSARY UTILITIES, ROADS, WALKS, ACCESSORIES, AND COLLATERAL EXPENSES SHALL NOT BE IN EXCESS OF $3,500: PROVIDED FURTHER, THAT IN CARRYING OUT THE PURPOSES OF THIS SECTION THE SECRETARY OF WAR AND THE SECRETARY OF THE NAVY MAY UTILIZE SUCH OTHER AGENCIES OF THE UNITED STATES AS THEY MAY DETERMINE UPON: PROVIDED FURTHER, THAT THE SECRETARY OF WAR AND THE SECRETARY OF THE NAVY, AT THEIR DISCRETION ARE HEREBY AUTHORIZED TO RENT SUCH HOUSING UNITS, UPON COMPLETION, TO ENLISTED MEN OF THE ARMY, NAVY, MARINE CORPS WITH FAMILIES, TO FIELD EMPLOYEES OF THE MILITARY AND NAVAL ESTABLISHMENTS WITH FAMILIES, AND TO WORKERS WITH FAMILIES WHO ARE ENGAGED, OR TO BE ENGAGED, IN INDUSTRIES ESSENTIAL TO THE MILITARY AND NAVAL NATIONAL DEFENSE PROGRAMS, INCLUDING WORK ON SHIPS UNDER THE CONTROL OF THE MARITIME COMMISSION. THE SECRETARY OF WAR AND THE SECRETARY OF THE NAVY ARE FURTHER AUTHORIZED TO USE SUCH RENTALS AS MAY BE COLLECTED FROM EACH HOUSING PROJECT FOR THE MANAGEMENT AND MAINTENANCE, OF THE HOUSING UNITS THEREIN, INCLUDING UTILITIES, ROADS, WALKS, AND ACCESSORIES, AND TO SET UP SPECIAL RESERVE ACCOUNTS FOR THE AMORTIZATION OF THE COST OF THE PROJECT: PROVIDED FURTHER, THAT THE AUTHORITY OF EXISTING LAW FOR THE NEGOTIATION OF COST- PLUS-A-FIXED-FEE CONTRACTS SHALL BE APPLICABLE TO HOUSING PROJECTS FOR WHICH FUNDS MAY BE MADE AVAILABLE TO THE WAR AND NAVY DEPARTMENTS OR THE MARITIME COMMISSION.' ( ITALICS SUPPLIED.)

THE LANGUAGE OF THE PROVISO IN THE LATTER ACT THAT THE AUTHORITY FOR THE NEGOTIATION OF COST-PLUS-A-FIXED-FEE CONTRACTS SHALL BE APPLICABLE "TO HOUSING PROJECTS FOR WHICH FUNDS MAY BE MADE AVAILABLE" TO THE WAR AND NAVY DEPARTMENTS OR THE MARITIME COMMISSION IS NOT EXPRESSLY OR BY NECESSARY IMPLICATION LIMITED TO FUNDS MADE AVAILABLE UNDER THAT ACT, BUT IS BROAD ENOUGH TO INCLUDE FUNDS MADE AVAILABLE TO SUCH AGENCIES FOR "HOUSING PROJECTS" UNDER PRIOR OR SUBSEQUENT ACTS. IT IS NOTED IN THIS CONNECTION THAT THIS PROVISO DOES NOT USE THE TERM "SUCH HOUSING PROJECTS" AS IS USED IN THE PRECEDING PROVISOS WITH APPARENT REFERENCE TO HOUSING PROJECTS AUTHORIZED BY THAT ACT. THIS CHANGE OF LANGUAGE--- OMITTING THE WORD "SUCH" IN THE LAST PROVISO--- IS SIGNIFICANT AS INDICATING A LEGISLATIVE INTENT NOT TO LIMIT THE AUTHORITY THERE GRANTED TO FUNDS MADE AVAILABLE UNDER THAT ACT. MOREOVER, SUCH INTERPRETATION WOULD BE FAR MORE REASONABLE THAN A CONTRARY ONE, FOR THERE IS NO APPARENT REASON WHY A DIFFERENT CONTRACTING PROCEDURE SHOULD BE REQUIRED WITH RESPECT TO FUNDS MADE AVAILABLE TO THE NAVY AND WAR DEPARTMENTS FOR THE CONSTRUCTION OF NATIONAL DEFENSE HOUSING PROJECTS UNDER THE PRIOR ACT THAN UNDER THE LATER ACT, WITH THE RESULTING CONFLICT OF METHODS AND INTERESTS, SUCH AS ARE DESCRIBED IN YOUR LETTER. ALSO, SUCH INTERPRETATION WOULD BE IN CONSONANCE WITH THE LEGISLATIVE POLICY SHOWN IN RECENT ENACTMENTS IN PARI MATERIA, PARTICULARLY THE ACT OF OCTOBER 14, 1940, PUBLIC NO. 849,"TO EXPEDITE THE PROVISION OF HOUSING IN CONNECTION WITH NATIONAL DEFENSE, AND FOR OTHER PURPOSES," WHICH AUTHORIZED AN APPROPRIATION OF $150,000,000 FOR THE FEDERAL WORKS ADMINISTRATOR TO PROVIDE HOUSING FOR PERSONS ENGAGED IN NATIONAL DEFENSE ACTIVITIES, BY CONTRACT OR OTHERWISE, WITHOUT REGARD TO SECTION 3709, REVISED STATUTES, THAT IS, WITHOUT REQUIRING ADVERTISING FOR COMPETITIVE BIDS, AND WHICH, IN SECTION 1 (B), EXPRESSLY SANCTIONS THE USE OF THE COST-PLUS-A-FIXED-FEE FORM OF CONTRACT, SUCH INTERPRETATION FINDS FURTHER SUPPORT IN THE LEGISLATIVE HISTORY OF THE ENACTMENT. SAID SECTION 201 OF THE SECOND SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1941, WAS INCORPORATED IN THE ACT BY SENATE AMENDMENT AS SUBSTANTIALLY MODIFIED BY THE HOUSE OF REPRESENTATIVES. IN THE HEARINGS ON THE BILL, H.R. 10263, BEFORE THE SUBCOMMITTEE OF THE SENATE APPROPRIATIONS COMMITTEE HAVING THE BILL UNDER CONSIDERATION, ADMIRAL MOREELL MADE THE FOLLOWING STATEMENT AND RECOMMENDED (P. 198) RESPECTING A PROPOSED AMENDMENT TO PROVIDE FUNDS FOR NATIONAL DEFENSE HOUSING:

IN THIS CONNECTION, I WOULD LIKE TO RECOMMEND THAT ON PAGE 23, LINE4, AFTER THE WORD "TITLE," THERE BE INSERTED A PROVISION TO GIVE THE DEPARTMENT AUTHORITY TO NEGOTIATE CONTRACTS FOR HOUSING WITH ANY FUNDS MADE AVAILABLE FOR THIS PURPOSE. THIS WILL SERVE TO EXPEDITE HOUSING PROJECTS. I MIGHT SAY THAT WE HAVE ALREADY RECEIVED ALLOCATIONS FROM THE UNITED STATES HOUSING AUTHORITY TO BUILD HOUSING, BUT WE CANNOT GET GOING QUICKLY ON THAT WORK BECAUSE THEY HAVE NO AUTHORITY TO NEGOTIATE AND WE HAVE NO AUTHORITY TO NEGOTIATE CONTRACTS WITH THEIR FUNDS THEREFORE, WE HAVE TO PROCEED IN THE USUAL WAY OF ADVERTISING AND GETTING BIDS. ORIGINALLY ADOPTED BY THE SENATE, SECTION 201 WOULD HAVE APPROPRIATED $100,000,000 FOR THE CONSTRUCTION OF SUCH PROJECTS "WITHOUT REGARD TO SECTION 3709 OF THE REVISED STATUTES," CONGRESSIONAL RECORD, AUGUST 29, 1940, PAGE 17041. CLEARLY THIS RELAXATION OF THE STATUTORY REQUIREMENT OF ADVERTISING FOR COMPETITIVE BIDS WOULD HAVE APPLIED ONLY TO THE APPROPRIATION THERE MADE. BUT AS MODIFIED BY THE HOUSE OF REPRESENTATIVES, CONGRESSIONAL RECORD SEPTEMBER 5, 1940, PAGES 17531- 17536, AGREED TO BY THE SENATE, AND AS FINALLY ENACTED, SUPRA, THERE WAS SUBSTITUTED FOR THIS PROVISION THE PROVISO HERE IN QUESTION AUTHORIZING COST-PLUS-A-FIXED-FEE CONTRACTS ON HOUSING PROJECTS "FOR WHICH FUNDS MAY BE MADE AVAILABLE TO THE WAR AND NAVY DEPARTMENTS," WITHOUT SPECIFIC RESTRICTION TO FUNDS THERE APPROPRIATED, AND APPARENTLY FOLLOWING THE RECOMMENDATION OF ADMIRAL MOREELL MADE WITH REFERENCE TO THE FUNDS RECEIVED FROM THE UNITED STATES HOUSING AUTHORITY UNDER THE PRIOR ACT.

THUS THE LANGUAGE OF THE PROVISO, THE REASON FOR ITS ENACTMENT, THE LEGISLATIVE POLICY, AND THE HISTORY OF THE LEGISLATION ALL POINT TO A CONCLUSION THAT THE CONGRESS INTENDED BY THE PROVISO TO AUTHORIZE THE USE OF COST-PLUS-A-FIXED-FEE CONTRACTS FOR NATIONAL DEFENSE HOUSING PROJECTS WHETHER THE FUNDS BE MADE AVAILABLE TO THE WAR AND NAVY DEPARTMENTS UNDER THE SECOND SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1941, OR UNDER TITLE II OF THE PRIOR ACT OF JUNE 28, 1940, OR OTHER LEGISLATION. TAKEN TOGETHER, I THINK THESE CONSIDERATIONS WARRANT THAT INTERPRETATION OF THE STATUTE, AND, ACCORDINGLY, THE QUESTION AS STATED IN THE NEXT TO LAST PARAGRAPH OF YOUR LETTER IS ANSWERED IN THE NEGATIVE.