B-135559, AUGUST 29, 1958, 38 COMP. GEN. 171

B-135559: Aug 29, 1958

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000 WITHOUT ADVERTISING IF THE PUBLIC EXIGENCY WILL NOT ADMIT OF THE DELAY INCIDENT TO ADVERTISING TO TESTIFY NEGOTIATION OF CONTRACTS FOR STOCK REPLENISHMENT WITHOUT REGARD TO THE USE OF THE ITEM OR TO THE EXISTENCE OF AN EMERGENCY IS IMPROPER. THE QUESTIONS WERE RAISED BY A LETTER OF DECEMBER 16. IN WHICH IT WAS NOTED THAT THE REFERENCED STATUTORY PROVISION WHICH PERMITS PURCHASES IN EXCESS OF $1. 000 WITHOUT ADVERTISING IF "THE PUBLIC EXIGENCY WILL NOT ADMIT OF THE DELAY INCIDENT TO ADVERTISING. " WAS BEING EMPLOYED BY THE FEDERAL SUPPLY SERVICE AS AUTHORITY TO NEGOTIATE PURCHASES FOR ORDINARY STOCK ITEMS WHEN DELIVERY WAS REQUIRED WITHIN 60 DAYS. WHEN THE ITEMS WERE IN SHORT SUPPLY OR WHEN BACK ORDERS EXISTED AT THE SUPPLY DEPOT.

B-135559, AUGUST 29, 1958, 38 COMP. GEN. 171

CONTRACTS - NEGOTIATION - PUBLIC EXIGENCY - STOCK REPLENISHMENT THE USE OF THE ADVERTISED PROCUREMENT EXCEPTION IN SECTION 302 (C) (2) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 41 U.S.C. 252 (C) (2), WHICH PERMITS PURCHASES IN EXCESS OF $1,000 WITHOUT ADVERTISING IF THE PUBLIC EXIGENCY WILL NOT ADMIT OF THE DELAY INCIDENT TO ADVERTISING TO TESTIFY NEGOTIATION OF CONTRACTS FOR STOCK REPLENISHMENT WITHOUT REGARD TO THE USE OF THE ITEM OR TO THE EXISTENCE OF AN EMERGENCY IS IMPROPER.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, AUGUST 29, 1958:

YOUR LETTER OF MARCH 14, 1958, WITH ENCLOSURES, REQUESTS OUR REVIEW OF CERTAIN QUESTIONS RAISED BY OUR CIVIL ACCOUNTING AND AUDITING DIVISION IN CONNECTION WITH THE USE OF AUTHORITY UNDER SECTION 302 (C) (2) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 252 (C) (2) TO NEGOTIATE PURCHASES FOR STOCK REPLENISHMENT.

THE QUESTIONS WERE RAISED BY A LETTER OF DECEMBER 16, 1957, TO THE COMMISSIONER OF THE FEDERAL SUPPLY SERVICE, IN WHICH IT WAS NOTED THAT THE REFERENCED STATUTORY PROVISION WHICH PERMITS PURCHASES IN EXCESS OF $1,000 WITHOUT ADVERTISING IF "THE PUBLIC EXIGENCY WILL NOT ADMIT OF THE DELAY INCIDENT TO ADVERTISING," WAS BEING EMPLOYED BY THE FEDERAL SUPPLY SERVICE AS AUTHORITY TO NEGOTIATE PURCHASES FOR ORDINARY STOCK ITEMS WHEN DELIVERY WAS REQUIRED WITHIN 60 DAYS, WHEN THE ITEMS WERE IN SHORT SUPPLY OR WHEN BACK ORDERS EXISTED AT THE SUPPLY DEPOT. IT WAS NOTED THAT THE ITEMS THUS PURCHASED INCLUDED WASTE RECEPTACLES, PAPER BAGS, WRAPPING PAPER, STEEL WOOL, LAUNDRY SOAP AND LAWN SPRINKLERS. THE VIEW WAS PRESENTED IN THE LETTER THAT THE USE OF THE PUBLIC EXIGENCY EXCEPTION TO THE ADVERTISING REQUIREMENT IS JUSTIFIED ONLY WHERE THERE EXISTS A SPECIFIC EMERGENCY TO WHICH THE PARTICULAR PURCHASE IS DIRECTLY RELATED, AND THAT A DEPLETED OR DECLINING STOCK LEVEL IN A SUPPLY DEPOT DOES NOT IN ITSELF CONSTITUTE AN EMERGENCY CONDITION SO AS TO PROVIDED A BASIS FOR THE USE OF THE EXCEPTION. IT WAS FURTHER NOTED THAT SECTION 203.08B.2 OF GSA MANUAL GS 5 -1 APPEARED TO ENCOURAGE THE USE OF THE EXCEPTION IN ORDER TO PREVENT DEPLETION OF STORES STOCK ITEMS.

IN REPLY THERETO, YOUR LETTER OF MARCH 14 STATES THAT AMOUNT PURCHASED UNDER ANNUAL CONTRACTS FOR STORES STOCK ITEMS ARE BASED ON FORECASTS OF QUANTITIES TO BE USED DURING THE YEAR. SINCE SUCH FORECASTS CANNOT ALWAYS ANTICIPATE ALL OF THE FACTORS WHICH AFFECT THE NEED FOR THE ITEMS, QUANTITIES PURCHASED UNDER THESE ANNUAL CONTRACTS ARE SOMETIMES LESS THAN THE ACTUAL DEMAND, AND CONSEQUENTLY SUPPLIES ARE EXHAUSTED BEFORE DELIVERIES CAN BE EFFECTED UNDER THE CONTRACT FOR THE NEXT PERIOD. SUCH INSTANCES, IT IS STATED, IT HAS BEEN FELT DESIRABLE TO NEGOTIATE CONTRACTS FOR THE INTERIM PERIOD, USUALLY AT PRICES NO GREATER THAN THE PREVIOUS ADVERTISED PRICE. IT IS FURTHER STATED THAT SUCH PRACTICE IS FAVORABLE TO THE GOVERNMENT IN TERMS OF ECONOMY AND EFFICIENCY AS COMPARED WITH POSSIBLE ALTERNATIVES AND THAT STOCK PUTS AT DEPOTS INCREASE ADMINISTRATIVE COSTS TO GSA AND THE USING AGENCY. IT IS ALSO STATED THAT IN YOUR VIEW NEITHER THE NATURE OF THE ITEM CONCERNED NOR THE FORESEEABILITY OF THE POSSIBILITY OF A PUBLIC EXIGENCY ARISING IN A PARTICULAR CASE AFFECTS THE VALIDITY OF THE EMPLOYMENT OF THE NEGOTIATING AUTHORITY UNDER SECTION 302 (C) (2). IT IS ALSO NOTED THAT THE POSITION OF GSA AS A DISTRIBUTOR RATHER THAN A CONSUMER OFTEN MAKES IT IMPRACTICAL TO DETERMINE WHEN AN AGENCY REQUIREMENT REPRESENTS AN EMERGENCY SITUATION. FINALLY, IT IS STATED THAT THE NEGOTIATION PROCEDURE IS EMPLOYED IN A MANNER CALCULATED TO INSURE THAT THE PURCHASES ARE MADE AT A REASONABLE PRICE FROM A RELIABLE SELLER; AND IT IS CONCLUDED THAT, IN VIEW OF THE FACT THAT THE BASIC PROCUREMENT IS SATISFIED THROUGH ADVERTISING, THE EXACT REQUIREMENT UNDER ANY PARTICULAR ADVERTISEMENT CANNOT ALWAYS BE FORESEEN AND GSA HAS BEEN GRANTED A SUBSTANTIAL DEGREE OF DISCRETION IN CARRYING OUT ITS ACTIVITIES UNDER THE ORGANIC ACT, THE METHODS NOW EMPLOYED IN CONNECTION WITH STORES STOCK PROCUREMENT SHOULD CONTINUE TO BE USED.

HOUSE REPORT NO. 670 OF THE 81ST CONGRESS, CLEARLY INDICATES AT PAGE 21, THAT THE EXCEPTION PERMITTING NEGOTIATION WHEN THE PUBLIC EXIGENCY WILL NOT ADMIT OF DELAY IS AN ADAPTION OF THE SIMILAR PROVISION CONTAINED IN SECTION 3709 OF THE REVISED STATUTES, AS AMENDED, 41 U.S.C. 5. IT IS STATED IN THE REPORT THAT THE EXCEPTION IS AVAILABLE WHENEVER URGENCY REQUIRES AN IMMEDIATE PURCHASE IRRESPECTIVE OF WHETHER THE EMERGENCY COULD OR SHOULD HAVE BEEN FORESEEN.

A PUBLIC EXIGENCY HAS BEEN DEFINED AS A SUDDEN AND UNEXPECTED HAPPENING, AN UNFORESEEN OCCURRENCE OR CONDITION, A PERPLEXING CONTINGENCY OR COMPLICATION OF CIRCUMSTANCES, OR SUDDEN OR UNEXPECTED OCCASION FOR ACTION. GOOD ROADS MACHINERY CO. V. UNITED STATES, 19 F.1SUPP. 652, 654. NUMEROUS CASES HAVE BEEN DECIDED, BOTH BY THE COURTS AND OUR OFFICE REGARDING THE EXISTENCE OF A PUBLIC EXIGENCY WARRANTING NEGOTIATION UNDER SECTION 3709 OF THE REVISED STATUTES. SEE, FOR EXAMPLE, 34 COMP. GEN. 368; 27 COMP. GEN. 73; 15 COMP. GEN. 1095; 14 COMP. GEN. 875. SEE, ALSO, UNITED STATES V. SHERIDAN-KIRK, 149 F. 809. IN EACH OF THE SITUATIONS IN WHICH THE APPLICABILITY OF THE PUBLIC EXIGENCY EXCEPTION HAS BEEN CONSIDERED, THE MATTER HAS BEEN DETERMINED ON THE BASIS OF THE USE TO WHICH THE MATERIALS UNDER PROCUREMENT ARE TO BE PUT. IN THIS CONNECTION, SECTION 303.03 OF GS 5 1, THE APPLICABLE REGULATION OF YOUR AGENCY STATES IN PART:

A. APPLICATION. IN ORDER FOR THIS AUTHORITY TO BE USED, THE NEED MUST BE COMPELLING AND OF UNUSUAL URGENCY, AS WHEN THE GOVERNMENT WOULD BE SERIOUSLY INJURED, FINANCIALLY OR OTHERWISE, IF THE SUPPLIES OR SERVICES TO BE PURCHASED WERE NOT FURNISHED BY A CERTAIN DATE, AND WHEN THEY COULD NOT BE PROCURED BY THAT DATE BY MEANS OF FORMAL ADVERTISING. THIS APPLIES IRRESPECTIVE OF WHETHER THAT URGENCY COULD OR SHOULD HAVE BEEN FORESEEN. THE FOLLOWING ARE ILLUSTRATIVE OF CIRCUMSTANCES WITH RESPECT TO WHICH THIS AUTHORITY MAY BE USED.

1. SUPPLIES, EQUIPMENT, OR SERVICES ARE NEEDED AT ONCE BECAUSE OF A FIRE, FLOOD, EXPLOSION, OR OTHER DISASTER.

2. ESSENTIAL EQUIPMENT IS REQUIRED FOR OR REPAIR TO A SHIP WHEN SUCH EQUIPMENT OR REPAIR IS NEEDED AT ONCE FOR COMPLIANCE WITH THE ORDERS OF THE SHIP.

3. DEVELOPMENTS IN CONNECTION WITH ANY ESSENTIAL GOVERNMENT ACTIVITY REQUIRE IMMEDIATE PURCHASE OF SUPPLIES OR SERVICES TO PERMIT ACCOMPLISHMENT OF SUCH ACTIVITIES WITHIN THE TIME REQUIRED.

WE CONCUR THAT THE TYPES OF SITUATIONS ILLUSTRATED IN THE FOREGOING QUOTATION ARE REPRESENTATIVE OF THOSE INSTANCES FOR WHICH THE EXCEPTION WAS INTENDED TO BE EMPLOYED.

WE FEEL, HOWEVER, THAT THE REVISION OF FEBRUARY 19, 1957, OF PARAGRAPH 203.08.2 OF GS 5-1, WHICH PROVIDES THAT UNDER THE CONDITIONS STATED THEREIN "THE STORES ACTIVITY SHOULD BE RECOGNIZED AS AN ,ESSENTIAL GOVERNMENT ACTIVITY" UNDER PARAGRAPH 303.03A.3," GOES BEYOND THE PROPER SCOPE OF THE ,PUBLIC EXIGENCY" AUTHORITY, AND CONSTITUTES AN OBVIOUS INVITATION FOR THE USE OF NEGOTIATION AS A MEANS OF AVOIDING OR OBVIATING A POSSIBLE EXIGENCY RATHER THAN OF MEETING AN EXISTING ONE.

THE LANGUAGE OF THE REVISED PARAGRAPH SEEMS TO IMPLY THAT TIME OF DELIVERY ALONE MIGHT CONSTITUTE A SUFFICIENT BASIS FOR NEGOTIATION EVEN WHERE THE DELIVERY TIME WAS DICTATED MERELY BY AN ESTIMATED OR ANTICIPATED DEPLETION OF STORE STOCKS, OR WHERE SUCH DELIVERY TIME AS SO SHORT THAT IT WOULD HAVE TO BE MADE A FACTOR IN DETERMINING AWARD UNDER AN ADVERTISED SOLICITATION OF BIDS. IN OUR AUDITS OF THE GENERAL SUPPLY FUND NUMEROUS INSTANCES HAVE BEEN FOUND WHERE DEPOT STOCKS WERE REPLENISHED BY NEGOTIATED PROCUREMENT UNDER CIRCUMSTANCES WHERE THE TIME OF DELIVERY TO ORDERING AGENCIES DID NOT APPEAR TO BE A FACTOR. FOR EXAMPLE, NEGOTIATED PURCHASES WERE MADE FOR STOCK REPLENISHMENT WHEN DELIVERY WAS REQUIRED IN 60 DAYS (ORDINARILY ADEQUATE TIME FOR PROCUREMENT BY ADVERTISING), OR WHEN MERELY ROUTINE PROCUREMENT ACTION WAS NEEDED TO PREVENT ORDINARY DEPLETION OF EXISTING STOCK OR TO RELIEVE LOW STOCK SITUATIONS, WITHOUT ANY INDICATION OF TRUE EMERGENCY EITHER ACTUALLY EXISTING OR BEING CLEARLY IMMINENT.

IT IS OUR UNDERSTANDING THAT THE GREAT BULK OF YOUR PROCUREMENT IS MADE UNDER OPEN END OR INDEFINITE QUANTITY "REQUIREMENTS" TYPE CONTRACTS ON A SIX OR TWELVE MONTH TERM BASIS. WE ASSUME THAT THERE ARE SUBSTANTIAL REASONS WHY CERTAIN ITEMS MAY BE MOST ECONOMICALLY OBTAINED ONLY BY THE USE OF FIXED QUANTITY CONTRACTS, AND THAT IT MAY BE IMPRACTICABLE IN EVERY SUCH CASE TO OBTAIN FOR THE GOVERNMENT EITHER BY INCREASES IN SCHEDULE DELIVERIES OR BY RE-ORDERS WITHIN STATED PERIODS OF TIME. WHEN NO SUCH METHOD CAN BE USED TO ASSURE MAINTENANCE OF ADEQUATE STORE STOCKS, WE WOULD NOT OBJECT TO NEGOTIATED PURCHASES FOR STOCK REPLENISHMENT IN INSTANCES IN WHICH EXCEPTIONALLY HEAVY AND SUDDEN DEMANDS MAKE IT OBVIOUS THAT A STOCK ITEM FOR WHICH THERE IS A NORMALLY STEADY REQUIREMENT WILL BE DEPLETED TO SUCH AN EXTENT THAT, UNLESS REPLACEMENTS ARE OBTAINED WITHIN LESS TIME THAN EVEN THE MINIMUM REQUIRED FOR PROCUREMENT BY ADVERTISING, A SUBSTANTIAL VOLUME OF NORMALLY ANTICIPATED ORDERS MIGHT NOT BE CAPABLE OF BEING FILLED. EVEN IN CASES OF THIS KIND, WE BELIEVE THAT CONSIDERATION SHOULD BE GIVEN TO NEGOTIATING FOR ONLY SUCH QUANTITIES AS WOULD REASONABLY BE EXPECTED TO BE REQUIRED BEFORE ADDITIONAL DELIVERIES COULD BE OBTAINED BY ADVERTISING.

IN ACCORDANCE WITH THE FOREGOING, WE MUST CONCLUDE THAT THE NEGOTIATION OF PROCUREMENT CONTRACTS UNDER THE EXCEPTION STATED AT SECTION 302 (C) (2) MUST BE JUSTIFIED IN TERMS OF THE SITUATION IN WHICH THE ITEM IS ACTUALLY NEEDED. THE PRESENT LANGUAGE OF PARAGRAPH 203.08B.2 IS, WE BELIEVE, IMPROPER IN THAT IT CLEARLY TENDS TO ENCOURAGE NEGOTIATED PURCHASES FOR STOCK REPLENISHMENT IN OTHER THAN ACTUAL EMERGENCY SITUATIONS, RATHER THAN TO EMPHASIZE THAT NEGOTIATION SHOULD BE RESORTED TO ONLY IN THE EXCEPTIONAL CASE.