B-16999, JUNE 30, 1941, 20 COMP. GEN. 931

B-16999, JUNE 30, 1941, 20 COMP. GEN. 931

WALSH-HEALEY ACT APPLICABILITY - CONTRACTS MADE WITHOUT ADVERTISING A CONTRACT FOR SUPPLIES IN EXCESS OF $10,000, MADE WITHOUT ADVERTISING PURSUANT TO THE AUTHORITY CONFERRED UPON THE SECRETARY OF WAR BY THE ACT OF JULY 2, 1940, IS, BY THE VERY TERMS OF THE ACT, SUBJECT TO THE LABOR REQUIREMENTS OF THE WALSH-HEALEY ACT UNLESS OTHERWISE EXEMPTED THEREFROM, AND, THEREFORE, IS NOT WITHIN THE CLASS OF CONTRACTS GENERALLY EXEMPTED FROM THE REQUIREMENTS OF THE LATTER ACT BECAUSE OF HAVING BEEN ENTERED INTO WITHOUT ADVERTISING. WHERE A MISUNDERSTANDING EXISTED AS TO THE APPLICABILITY OF THE WALSH- HEALEY ACT TO A WAR DEPARTMENT SUPPLY CONTRACT ENTERED INTO WITHOUT ADVERTISING PURSUANT TO THE ACT OF JULY 2, 1940, AND CONTRACTOR'S BID, AS WELL AS THE ACCEPTANCE, WAS MADE UNDER THE ERRONEOUS IMPRESSION THE ACT WAS INAPPLICABLE, THE CONTRACTOR MAY NOT BE REQUIRED TO COMPLY WITH ITS PROVISIONS UNLESS IT WILL AGREE TO DO SO.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR JUNE 30, 1941:

THERE HAS BEEN CONSIDERED YOUR LETTER OF MAY 13, 1941, AS FOLLOWS:

THERE ARE TRANSMITTED HEREWITH COPIES OF CONTRACTS NUMBERS W431-QM 4206 AND W431-QM-4320, WITH HOPE WEBBING COMPANY, PROVIDENCE, RHODE ISLAND, DATED DECEMBER 5, 1940 AND DECEMBER 27, 1940, RESPECTIVELY, TOGETHER WITH ALL PERTINENT CORRESPONDENCE BETWEEN THE CONTRACTING OFFICER AND THE CONTRACTOR. THESE CONTRACTS WERE ENTERED INTO BY THE UNITED STATES OF AMERICA, REPRESENTED BY MAJOR H. J. HUNKER, QUARTERMASTER CORPS, CONTRACTING OFFICER, JEFFERSONVILLE QUARTERMASTER DEPOT, JEFFERSONVILLE, INDIANA.

THE DIFFICULTIES BEING EXPERIENCED BY THE CONTRACTING OFFICER WERE FIRST BROUGHT TO THE ATTENTION OF THE QUARTERMASTER GENERAL'S OFFICE IN WASHINGTON UNDER LETTER OF MARCH 21, 1941, COPY ATTACHED, WHICH LETTER SET FORTH A COMPLETE SYNOPSIS OF THE CASE. THE OPINIONS OF THE QUARTERMASTER GENERAL'S OFFICE IN ANSWER TO THE QUESTIONS PROPOUNDED IN THE BASIC COMMUNICATION WERE STATED IN ITS FIRST INDORSEMENT, DATED MARCH 27, 1941, A COPY OF WHICH IS ALSO ATTACHED. ACTING UPON THIS FIRST INDORSEMENT, THE CONTRACTING OFFICER FORWARDED THE SUBJECT CONTRACTS TO THE HOPE WEBBING COMPANY FOR EXECUTION, BUT THESE WERE RETURNED UNEXECUTED AS STATED IN THE ATTACHED COPY OF SECOND INDORSEMENT FROM THE COMMANDING OFFICER,JEFFERSONVILLE QUARTERMASTER DEPOT, DATED MAY 2, 1941.

THE FOLLOWING QUESTIONS ARE PRESENTED FOR YOUR OPINION:

(1)IF A SUPPLY CONTRACT IS ENTERED INTO PURSUANT TO THE PROVISIONS OF SECTION (1) (A), ACT OF JULY 2, 1940 ( PUBLIC 703, 76TH CONGRESS) IN AN AMOUNT IN EXCESS OF $10,000.00, IS IT SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT?

(2) IF THE ABOVE QUESTION IS ANSWERED IN THE AFFIRMATIVE, INASMUCH AS THERE MIGHT HAVE BEEN A POSSIBLE MISUNDERSTANDING BETWEEN THE CONTRACTING PARTIES AS TO THE APPLICABILITY AND INCLUSION IN THE CONTRACT OF THE PROVISIONS OF THE WALSH-HEALEY ACT, SHOULD THE CONTRACTOR BE AFFORDED ANY RELIEF FROM STRICT ADHERENCE TO ALL PROVISIONS OF THIS ACT?

(3) ASSUMING QUESTION (1) TO BE ANSWERED AFFIRMATIVELY WITH NO RELIEF GRANTED UNDER QUESTION (2), AND THE CONTRACTOR CONTINUES TO REFUSE TO EXECUTE THE CONTRACTS, NOTWITHSTANDING THE AMOUNT OF PARTIAL PREFERENCE, ON WHAT BASIS SHOULD PAYMENT FOR THE COMPLETED WORK BE MADE?

IT IS REQUESTED THAT THE ATTACHED ENCLOSURES BE RETURNED WITH YOUR OPINION.

THE ACT OF JUNE 30, 1936, 49 STAT. 2036, COMMONLY KNOWN AS THE WALSH HEALEY ACT, RELATES TO CONTRACTS "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT IN ANY AMOUNT EXCEEDING $10,000" AND REQUIRES, INTER ALIA, THAT SUCH CONTRACTS SHALL CONTAIN CERTAIN REPRESENTATIONS AND STIPULATIONS WITH RESPECT TO MINIMUM WAGES, MAXIMUM HOURS, CHILD LABOR, WORKING CONDITIONS, ETC. SECTION 9 THEREOF PROVIDES THAT THE ACT "SHALL NOT APPLY TO PURCHASES OF SUCH MATERIALS, SUPPLIES, ARTICLES, OR EQUIPMENT AS MAY USUALLY BE BOUGHT IN THE OPEN MARKET," AND THIS HAS BEEN CONSTRUED TO RELATE TO OPEN-MARKET PURCHASES PERMITTED BY STATUTE TO BE MADE WITHOUT ADVERTISING FOR BIDS, AS FOR EXAMPLE, EMERGENCY PURCHASES AUTHORIZED TO BE PROCURED WITHOUT ADVERTISING FOR BIDS UNDER SECTION 3709, REVISED STATUTES, OR 10 U.S.C. 1201.

SECTION 1 (A) OF THE ACT OF JULY 2, 1940, PUBLIC NO. 703, 54 STAT. 712, ENTITLED " AN ACT TO EXPEDITE THE STRENGTHENING OF THE NATIONAL DEFENSE," AUTHORIZES THE SECRETARY OF WAR TO MAKE CERTAIN CONTRACTS WITH OR WITHOUT ADVERTISING, BUT PROVIDES, IN PART, AS FOLLOWS:

* * * THAT NO CONTRACT ENTERED INTO PURSUANT TO THE PROVISIONS OF THIS SECTION WHICH WOULD OTHERWISE BE SUBJECT TO THE PROVISIONS OF THE ACT ENTITLED " AN ACT TO PROVIDE CONDITIONS FOR THE PURCHASE OF SUPPLIES AND THE MAKING OF CONTRACTS BY THE UNITED STATES, AND FOR OTHER PURPOSES," APPROVED JUNE 30, 1936 (49 STAT. 2036; U.S.C., SUPP. V, TITLE 41, SECS. 35 -45), SHALL BE EXEMPT FROM THE PROVISIONS OF SUCH ACT SOLELY BECAUSE OF BEING ENTERED INTO WITHOUT ADVERTISING PURSUANT TO THE PROVISIONS OF THIS SECTION; * * *

THUS, WHILE SECTION 1 OF THE ACT OF JULY 2, 1940, SUPRA, AUTHORIZES THE EXECUTION OF CERTAIN CONTRACTS WITHOUT ADVERTISING--- WHICH AUTHORITY GENERALLY WOULD EXEMPT SUCH CONTRACTS FROM THE PROVISIONS OF THE WALSH- HEALEY ACT--- THE SAID ACT CLEARLY PROVIDES THAT SUCH AUTHORITY IS NOT TO BE CONSTRUED AS EXEMPTING CONTRACTS ENTERED INTO PURSUANT THERETO FROM THE REQUIREMENTS OF THE WALSH-HEALEY ACT. THAT IS TO SAY, CONTRACTS EXECUTED PURSUANT TO THE ACT OF JULY 2, 1940, ARE REQUIRED TO BE MADE SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT UNLESS THEY OTHERWISE ARE EXEMPTED THEREFROM. FOR EXAMPLE, THE WALSH HEALEY ACT ITSELF EXCEPTS CERTAIN CLASSES OF CONTRACTS FROM ITS TERMS AND SECTION 6 THEREOF AUTHORIZES THE SECRETARY OF LABOR, UNDER CERTAIN CONDITIONS, TO EXEMPT SPECIFIC CONTRACTS THEREFROM. THE ACT OF JULY 2, 1940, IS NOT TO BE CONSTRUED AS AFFECTING THOSE CONTRACTS. IT MAY BE, TOO, THAT UNDER A GIVEN SET OF CIRCUMSTANCES A PARTICULAR CONTRACT ENTERED INTO BY VIRTUE OF THE AUTHORITY OF THE ACT OF JULY 2, 1940, ALSO COULD BE REGARDED AS AN "EMERGENCY" PURCHASE, AS THAT TERM IS GENERALLY USED, BUT SUCH A SITUATION DOES NOT APPEAR TO EXIST IN THE PRESENT CASE AND CONSEQUENTLY NEED NOT BE CONSIDERED.

THEREFORE, IN REPLY TO YOUR FIRST QUESTION, YOU ARE ADVISED THAT A CONTRACT FOR SUPPLIES IN AN AMOUNT IN EXCESS OF $10,000, WHICH OTHERWISE WOULD BE SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT, IS NOT EXEMPTED FROM SUCH PROVISIONS SOLELY BECAUSE THE PURCHASE WAS MADE IN THE "OPEN MARKET" PURSUANT TO THE PROVISIONS OF THE ACT OF JULY 2, 1940, PUBLIC, NO. 703.

AS TO THE EFFECT, GENERALLY, OF THE FAILURE TO INCLUDE MANDATORY PROVISIONS IN PUBLIC CONTRACTS, ATTENTION IS INVITED TO DECISION TO YOU DATED JUNE 14, 1941 (B-16920), 20 COMP. GEN. 890, WITH RESPECT TO THE EIGHT-HOUR LAW OF 1912, WHEREIN IT WAS STATED THAT---

* * * THE ACTION TO BE TAKEN IN A PARTICULAR CASE, EITHER BY THIS OFFICE OR BY AN ADMINISTRATIVE OFFICE, WOULD SEEM TO BE FOR DETERMINATION IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES AND THE CHARACTER OF THE CONTRACT INVOLVED IN THE PARTICULAR CASE. * * *

CONTRACT NO. W-431-QM-4206 CONSISTS OF THE ACCEPTANCE ON DECEMBER 5, 1940, OF THE OFFER CONTAINED IN HOPE WEBBING COMPANY'S CONFIRMING LETTER OF NOVEMBER 29, 1940. NEITHER THE OFFER NOR THE ACCEPTANCE THEREOF MAKES REFERENCE TO THE PROVISIONS OF THE WALSH-HEALEY ACT. NEVERTHELESS IT APPEARS THE CONTRACTOR, AT THE TIME IT MADE THE OFFER, UNDERSTOOD COMPLIANCE WITH THE PROVISIONS OF THE SAID ACT WAS REQUIRED BECAUSE IN ITS LETTER OF DECEMBER 7, 1940 (AFTER THE AWARD), WHEREIN IT SOUGHT EXEMPTION FROM CERTAIN REQUIREMENTS OF THE SAID ACT, IT STATED:

WE ARE NOW COMPLYING WITH ALL THE CONDITIONS OF THAT ACT EXCEPT THAT WE HAVE NOT YET BEEN ABLE TO WORK OUT THE COMPLICATED SYSTEM OF RECORDS REQUIRED TO SEGREGATE LABOR AGAINST WALSH-HEALEY CONTRACTS FROM ROUTINE OPERATIONS. FROM COTTON TO FINISHED WEBBING, THE NUMBER OF PROCESSES, SOME OVERLAPPING, IS CONSIDERABLE. THE DETAILED RECORDS REQUIRED WILL NECESSITATE A SYSTEM WHICH WE HAVE NOT YET PERFECTED.

THE ASSISTANT PROCUREMENT OFFICER REPLIED TO THAT LETTER UNDER DATE OF DECEMBER 11, 1940, AND ADVISED THE CONTRACTOR THAT "THE WALSH-HEALEY ACT IS NOT APPLICABLE TO THIS PURCHASE, AS SAME IS AN EMERGENCY, OPEN MARKET PURCHASE AND SUCH CONTRACTS AS ARE AWARDED IN THIS MANNER ARE NOT SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT.' THE CONTRACTOR STATES THAT ON SUCH ASSURANCE THE NECESSARY YARN WAS PURCHASED AND PRODUCTION STARTED. THEREAFTER, AND UNTIL THE PRESENT TIME, AN EFFORT HAS BEEN MADE BY THE WAR DEPARTMENT TO OBTAIN THE CONTRACTOR'S SIGNATURE TO A FORMAL CONTRACT CONTAINING THE REQUIREMENTS OF THE WALSH HEALEY ACT BUT IT APPEARS THE CONTRACTOR HAS REFUSED TO SIGN THE CONTRACT ON SUCH BASIS. IN THE MEANTIME IT IS UNDERSTOOD THE DIVISION OF PUBLIC CONTRACTS, DEPARTMENT OF LABOR, INFORMED BOTH THE CONTRACTOR AND THE WAR DEPARTMENT, APPARENTLY UNDER A MISAPPREHENSION AS TO THE FACTS, THAT A SIMILAR CONTRACT (W-431-QM -3867) EXECUTED UNDER SIMILAR CIRCUMSTANCES AT ABOUT THE SAME TIME WAS NOT CONSIDERED SUBJECT TO THE WALSH-HEALEY ACT ON THE THEORY THAT THE PURCHASE WAS MADE IN THE OPEN MARKET UNDER AN "EMERGENCY.'

IN VIEW OF THE SPECIFIC PROVISIONS OF THE ACT OF JULY 2, 1940, IT APPEARS THE CONTRACT SHOULD HAVE BEEN AWARDED SUBJECT TO THE CONDITIONS OF THE WALSH-HEALEY ACT. NEVERTHELESS, THERE APPEARS TO HAVE BEEN SOME MISUNDERSTANDING IN THE MATTER BY THE WAR DEPARTMENT AS EVIDENCED BY THE FACT THE CONTRACTOR ORIGINALLY WAS ADVISED THE PROVISIONS OF SAID ACT DID NOT APPLY. APPARENTLY, IN RELIANCE ON SUCH ADVICE THE CONTRACTOR MADE ITS COMMITMENTS. THEREAFTER THE WAR DEPARTMENT ADVISED THE CONTRACTOR THE PROVISIONS OF THE WALSH-HEALEY ACT DID APPLY BUT THE DEPARTMENT OF LABOR ADVISED BOTH THE CONTRACTOR AND THE WAR DEPARTMENT IT CONSIDERED A SIMILAR CONTRACT NOT SUBJECT TO THE WALSH-HEALEY ACT. IT APPEARS FROM SECOND INDORSEMENT OF MAY 2, 1941, FROM THE CONTRACTING OFFICER, MAJ. H. J. HUNKER, TO THE QUARTERMASTER GENERAL, THAT ALL DELIVERIES UNDER THE CONTRACT HAVE BEEN COMPLETED. UNDER THESE CIRCUMSTANCES, AND HAVING REGARD FOR THE FACT THE CONTRACTOR STATED IT WAS COMPLYING WITH ALL CONDITIONS OF THE WALSH-HEALEY ACT EXCEPT WITH RESPECT TO THE MAINTENANCE OF DETAILED RECORDS, NO USEFUL PURPOSE NOW WOULD BE SERVED BY REQUIRING THE CONTRACTOR TO SIGN A FORMAL CONTRACT WHEREIN IT WOULD AGREE TO COMPLY WITH THE REQUIREMENTS OF THE WALSH HEALEY ACT IN THE PERFORMANCE OF A CONTRACT ALREADY COMPLETED. HENCE, CREDIT FOR PAYMENTS MADE OR TO BE MADE UNDER CONTRACT NO. W-431-QM 4206, WILL NOT BE DISALLOWED BY THIS OFFICE FOR THE REASON THAT THE FORMAL CONTRACT MAY NOT INCLUDE THE REQUIREMENTS OF THE WALSH-HEALEY ACT.

CONTRACT NO. W-431-QM-4320 IS IN THE AMOUNT OF $155,536.28, AND CONSISTS OF THE ACCEPTANCE ON DECEMBER 27, 1940, OF THE OFFER CONTAINED IN THE HOPE WEBBING CO.'S CONFIRMING LETTER OF DECEMBER 24, 1940, WHEREIN IT IS REPORTED THE SAID COMPANY EXPRESSED THE ASSUMPTION THE PROVISIONS OF THE WALSH-HEALEY ACT WOULD NOT BE APPLICABLE TO PERFORMANCE OF THE CONTRACT. IN THE TELEGRAM OF ACCEPTANCE DATED DECEMBER 27, 1940, THE CONTRACTING OFFICER NOTIFIED THE CONTRACTOR TO PROCEED WITH PRODUCTION AND STATED THAT THE WALSH-HEALEY ACT WAS NOT APPLICABLE THERETO. NEVERTHELESS, THEREAFTER A SIMILAR SITUATION RESULTED WITH RESPECT TO THIS CONTRACT AS OUTLINED ABOVE IN CONNECTION WITH CONTRACT NO. W-431-QM-4206. THAT IS TO SAY, THE WAR DEPARTMENT SUBSEQUENTLY DECIDED THE WALSH-HEALEY ACT WAS APPLICABLE TO THE CONTRACT AND REQUESTED THE CONTRACTOR TO SIGN A FORMAL CONTRACT EMBODYING ITS PROVISIONS, WHICH THE CONTRACTOR REFUSED TO DO ON THE BASIS OF THE RULING BY THE DEPARTMENT OF LABOR IN CONNECTION WITH CONTRACT NO. W -431-QM-3867.

IT IS APPARENT THAT, AT THE TIME THE CONTRACT WAS AWARDED, A MISUNDERSTANDING EXISTED AS TO THE APPLICATION OF THE PROVISIONS OF THE WALSH-HEALEY ACT TO HIS CONTRACT. IT IS EVIDENT, TOO, THAT THE CONTRACTOR MADE ITS BID UNDER THE IMPRESSION THE WALSH-HEALEY ACT WAS NOT APPLICABLE THERETO AND THE BID WAS ACCEPTED ON THAT BASIS. THE CONTRACT HAVING BEEN AWARDED UNDER THOSE CIRCUMSTANCES, THERE WOULD APPEAR TO BE NO PROPER BASIS TO REQUIRE THE CONTRACTOR TO COMPLY WITH THE PROVISIONS OF THE WALSH -HEALEY ACT UNLESS IT WILL AGREE TO DO SO. SEE B-16920, JUNE 14, 1941, 20 COMP. GEN. 890. IN THIS CONNECTION, IT APPEARS THE CONTRACTOR MAY BE COMPLYING WITH THE WALSH-HEALEY ACT IN ALL ESSENTIAL RESPECTS EXCEPT FOR THE MAINTENANCE OF DETAILED AND SEGREGATED RECORDS AND IT FURTHER APPEARS FROM MAJ. H. J. HUNKER'S SECOND INDORSEMENT OF MAY 2, 1941, THAT APPROXIMATELY FOUR-FIFTHS OF THE REQUIRED DELIVERIES UNDER THE CONTRACT HAD BEEN COMPLETED AT THAT TIME. BY NOW THE CONTRACT NO DOUBT HAS BEEN ALMOST ENTIRELY COMPLETED AND OBVIOUSLY NO USEFUL PURPOSE WOULD BE SERVED BY ATTEMPTING AT THIS TIME TO SECURE THE CONTRACTOR'S AGREEMENT TO COMPLY WITH THE PROVISIONS OF THE WALSH-HEALEY ACT EITHER AS TO THE PRODUCTION OF THE MATERIALS ALREADY DELIVERED, OR AS TO PRODUCTION OF THE SMALL QUANTITY OF MATERIAL YET TO BE DELIVERED, IF ANY. CONSEQUENTLY, CREDIT FOR PAYMENTS MADE OR TO BE MADE UNDER THE SAID CONTRACT WILL NOT BE DISALLOWED BY THIS OFFICE FOR THE REASON THAT THE FORMAL CONTRACT MAY NOT INCLUDE THE REQUIREMENTS OF THE WALSH-HEALEY ACT.

THE ENCLOSURES FORWARDED WITH YOUR LETTER ARE RETURNED HEREWITH AS REQUESTED.