B-15400, APRIL 5, 1941, 20 COMP. GEN. 603

B-15400: Apr 5, 1941

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WHERE IT IS ADMINISTRATIVELY DETERMINED THAT SUCH REPLACEMENT WOULD BE MORE ADVANTAGEOUS TO THE GOVERNMENT THAN REPAIRING THE OLD PARTS. THE GENERAL ACCOUNTING OFFICE WILL NOT OBJECT TO THE AWARDING OF SIMILAR CONTRACTS FOR RECONDITIONED AUTOMOBILE PARTS AFTER ADVERTISING FOR BIDS SEEKING THE BEST PRICE ON AN EXCHANGE BASIS ONLY. 19 COMP. 1941: I HAVE YOUR LETTER OF MARCH 8. AS FOLLOWS: REFERENCE IS MADE TO THE DECISION OF THE ACTING COMPTROLLER GENERAL DATED MAY 19. AT THE TIME THAT DECISION WAS RENDERED. THERE WAS AN EXISTING CONTRACT. THE FOLLOWING WAS STATED IN THE DECISION: "IN VIEW OF THE FACTS STATED. IT IS CONCLUDED THAT WHERE A USED MOTOR IS THUS REPLACED BY A RECONDITIONED MOTOR AS A SUBSTITUTE FOR RECONDITIONING THE USED MOTOR.

B-15400, APRIL 5, 1941, 20 COMP. GEN. 603

CONTRACTS - EXCHANGES - USED FOR RECONDITIONED AUTOMOBILE PARTS OLD AUTOMOBILE PARTS MAY BE REPLACED WITH RECONDITIONED PARTS, WITHOUT ADVERTISING FOR CASH BIDS ON THE OLD PARTS, UNDER A PROCUREMENT DIVISION CONTRACT WHICH PROVIDES ONLY A NET CASH CHARGE FOR RECONDITIONED PARTS BASED ON THE EXCHANGE OF OLD PARTS, WHERE IT IS ADMINISTRATIVELY DETERMINED THAT SUCH REPLACEMENT WOULD BE MORE ADVANTAGEOUS TO THE GOVERNMENT THAN REPAIRING THE OLD PARTS, AND THE GENERAL ACCOUNTING OFFICE WILL NOT OBJECT TO THE AWARDING OF SIMILAR CONTRACTS FOR RECONDITIONED AUTOMOBILE PARTS AFTER ADVERTISING FOR BIDS SEEKING THE BEST PRICE ON AN EXCHANGE BASIS ONLY. 19 COMP. GEN. 930, MODIFIED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, APRIL 5, 1941:

I HAVE YOUR LETTER OF MARCH 8, 1941, AS FOLLOWS:

REFERENCE IS MADE TO THE DECISION OF THE ACTING COMPTROLLER GENERAL DATED MAY 19, 1937 (16 COMP. GEN. 1013), TO THE SECRETARY OF THE TREASURY ENTITLED " CONTRACTS--- EXCHANGE--- USED FOR RECONDITIONED MOTORS--- VALUE OF USED MOTORS TRADED IN.'

AT THE TIME THAT DECISION WAS RENDERED, THERE WAS AN EXISTING CONTRACT, NO. TYPS--- 12672, WITH THE FORD MOTOR COMPANY, UNDER WHICH A RECONDITIONED MOTOR COULD BE OBTAINED IN EXCHANGE FOR A USED MOTOR IN NEED OF REPAIR AT A NET COST OF $43 PLUS FREIGHT CHARGES. IN VIEW OF THE EXISTING CONTRACT AND THE ADVANTAGES THEREOF TO THE GOVERNMENT, THE FOLLOWING WAS STATED IN THE DECISION:

"IN VIEW OF THE FACTS STATED, IT IS CONCLUDED THAT WHERE A USED MOTOR IS THUS REPLACED BY A RECONDITIONED MOTOR AS A SUBSTITUTE FOR RECONDITIONING THE USED MOTOR, ONLY THE NET COST OF SUCH EXCHANGE OR SUBSTITUTION NEED BE CHARGED TO THE APPLICABLE APPROPRIATION.'

IN A SUBSEQUENT DECISION (19 COMP. GEN. 930) TO THIS DEPARTMENT, THE ACTING COMPTROLLER GENERAL CALLED ATTENTION TO A CONTRACT MADE WITH A LOCAL DEALER FOR THE EXCHANGE OF USED ENGINES IN PART PAYMENT FOR RECONDITIONED ENGINES TO REPLACE THEM, AND AFTER CITING SEVERAL PREVIOUS DECISIONS AND AFTER AMPLIFYING THE DECISION APPEARING IN 16 COMP. GEN. 1013, CONCLUDED AS FOLLOWS:

"WHILE THE SUBJECT AND SIMILAR CONTRACTS HERETOFORE ENTERED INTO FOR THE REPLACEMENT OF USED MOTORS WITH RECONDITIONED MOTORS WILL NOT BE QUESTIONED FURTHER SOLELY BY REASON OF FAILURE TO SOLICIT CASH BIDS ON THE USED ENGINES REPLACED, IMMEDIATE ADMINISTRATIVE MEASURES SHOULD BE TAKEN TO PRECLUDE ENTERING INTO ANY SUCH CONTRACTS IN THE FUTURE WITHOUT SOLICITING CASH BIDS AS WELL AS TRADE-IN ALLOWANCES ON THE USED ENGINES TO BE REPLACED * * *.'

THIS DEPARTMENT HAS RECEIVED GENERAL SCHEDULE OF SUPPLIES CIRCULAR NO. 452-A PROMULGATED FEBRUARY 20, 1941, BY THE PROCUREMENT DIVISION OF THE TREASURY DEPARTMENT, ANNOUNCING CONTRACT NO. TPS-38166 WITH THE FORD MOTOR COMPANY COVERING REPAIR PARTS FOR FORD VEHICLES FOR THE PERIOD FEBRUARY 15 TO JUNE 30, 1941. THE CONTRACT INCLUDED THE EXCHANGE OF USED ENGINES FOR RECONDITIONED ENGINES AT AN ESTABLISHED NET COST, IN A MANNER SIMILAR TO THE PREVIOUS CONTRACT TPS-12672 REFERRED TO IN 16 COMP. GEN. 1013.

IT IS QUITE PROBABLE THAT VARIOUS BUREAUS OF THIS DEPARTMENT WILL FIND IT ADVANTAGEOUS TO USE THE EXCHANGE FEATURE OF THIS CONTRACT AS A SUBSTITUTE FOR NECESSARY REPAIRS TO A USED MOTOR OR SOME OTHER PART OF A VEHICLE. OBVIOUSLY, CASH BIDS COULD NOT HAVE BEEN SOLICITED BY THE PROCUREMENT DIVISION IN MAKING THIS GENERAL CONTRACT, BECAUSE IT WAS IMPOSSIBLE AT THE TIME TO ASCERTAIN WHAT PARTICULAR ENGINES OR PARTS WOULD BE OFFERED FOR EXCHANGE DURING THE LIFE OF THE CONTRACT. YOUR DECISION IS THEREFORE URGENTLY NEEDED ON THE FOLLOWING QUESTIONS:

1. MAY THIS DEPARTMENT ORDER AN EXCHANGE OF A USED PART, IN NEED OF REPAIRS, FOR A RECONDITIONED PART UNDER CONTRACT TPS-38166, AND CHARGE ONLY THE NET COST TO THE APPLICABLE APPROPRIATION, WITHOUT A SHOWING THAT CASH BIDS AND TRADE-IN ALLOWANCES WERE SOLICITED ON THE PARTICULAR PARTS TO BE REPLACED?

2. IF YOUR DECISION ON QUESTION ONE IS IN THE AFFIRMATIVE, WHAT IS THE FUNDAMENTAL DIFFERENCE WHICH PERMITS THIS ACTION UNDER A GENERAL SCHEDULE OF SUPPLIES CONTRACT AND PROHIBITS IT UNDER A DEPARTMENT CONTRACT?

3. IF YOUR DECISION ON QUESTION TWO IS TO THE EFFECT THERE IS NO FUNDAMENTAL DIFFERENCE, MAY THIS DEPARTMENT HEREAFTER, IN THE ABSENCE OF A GENERAL CONTRACT SUCH AS TPS-38166, MAKE A DEFINITE CONTRACT FOR AN EXCHANGE, IN LIEU OF A REPAIR JOB, WITHOUT SOLICITING FOR CASH BIDS?

YOUR DECISION AT AN EARLY DATE ON THE QUESTIONS SUBMITTED WILL BE GRATEFULLY RECEIVED.

UNLIKE THE PRICE LISTS WHICH FORM A PART OF THE CONTRACT CONSIDERED IN 16 COMP. GEN. 351; ID. 782; ID. 1013, THE PRICE LISTS SUBMITTED AS A PART OF CONTRACT NO. TPS-38166, DATED FEBRUARY 14, 1941, DO NOT PROVIDE A CASH PRICE FOR WHICH THE RECONDITIONED PARTS LISTED THEREIN MAY BE OBTAINED WITHOUT TRADING IN OLD PARTS OF LIKE KIND. THESE LISTS PROVIDE A NET CASH CHARGE FOR SUCH PARTS BASED ON THE EXCHANGE, IN EACH INSTANCE, OF A SIMILAR OLD PART IN NEED OF REPAIRING OR RECONDITIONING. IN OTHER WORDS, CONTRACT NO. TPS-38166 DOES NOT PROVIDE ANY PRICE AT WHICH THE GOVERNMENT MAY OBTAIN A RECONDITIONED PART WITHOUT TRADING IN AN OLD PART OF LIKE KIND, AND IT DOES NOT SHOW EITHER A SPECIFIC TRADE-IN ALLOWANCE FOR OLD PARTS OR ANY FIGURES FROM WHICH SUCH ALLOWANCE MAY BE DEFINITELY ASCERTAINED. THIS CIRCUMSTANCE LENDS SUPPORT TO THE VIEW THAT THE PARTS RECONDITIONING PLAN OF THE FORD MOTOR CO. IS GENERALLY CONSIDERED TO INVOLVE MERELY THE FURNISHING OF A REPAIR SERVICE. IN THIS VIEW OF THE MATTER, THE GOVERNMENT IS OBTAINING, IN PRACTICAL EFFECT, ONLY A REPAIR OR RECONDITIONING SERVICE, AND AVOIDS HAVING AN AUTOMOBILE OUT OF SERVICE WHILE A PARTICULAR PART IS BEING RECONDITIONED. THIS WAS THE REAL BASIS FOR THE HOLDING IN 16 COMP. GEN. 1013, THAT THE VALUE OF THE OLD PART NEED NOT BE COVERED INTO THE TREASURY AS A MISCELLANEOUS RECEIPT.

THE 1941 CONTRACT HERE INVOLVED, LIKE THAT CONSIDERED IN 16 COMP. GEN. 782, AND 16 COMP. GEN. 1013, IS A GENERAL SUPPLY CONTRACT WITH THE FORD MOTOR CO.; AND WHILE NO TRADE-IN ALLOWANCES ARE SET FORTH IN OR DETERMINABLE THEREUNDER, IT MUST BE CONSIDERED THAT THE VALUE OF THE USED PARTS WAS CONSIDERED IN SETTING THE PRICES FOR THE EXCHANGE RECONDITIONED PARTS AND THE CIRCUMSTANCES ARE SUCH THAT THE TRADE-IN ALLOWANCE SO CONSIDERED BY THE CONTRACTOR MAY BE ACCEPTED AS BEING SUBSTANTIALLY LARGER THAN WOULD BE BID FOR THE OLD PARTS ON A CASH BASIS BY ANY OTHER BIDDER.

IN VIEW OF THE CIRCUMSTANCES NOW APPEARING, WHERE IT IS ADMINISTRATIVELY DETERMINED THAT THE PROCUREMENT OF A RECONDITIONED PART IS MORE ADVANTAGEOUS TO THE GOVERNMENT THAN THE REPAIR OF THE OLD PART INVOLVED, THIS OFFICE WILL NOT OBJECT TO THE PROCUREMENT OF RECONDITIONED PARTS ON THE BASIS PROVIDED BY CONTRACT NO. TPS-38166 WITHOUT FURTHER ADVERTISING, OR TO THE AWARDING OF SIMILAR CONTRACTS FOR RECONDITIONED AUTOMOBILE PARTS AFTER ADVERTISING FOR BIDS SEEKING THE BEST PRICE ON AN EXCHANGE BASIS ONLY. TO THE EXTENT THAT THE DECISION IN 19 COMP. GEN. 930 IS IN CONFLICT WITH WHAT IS SAID HEREIN IT WILL NOT BE FOLLOWED HEREAFTER.