B-173988, NOV 22, 1971

B-173988: Nov 22, 1971

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

MITCHELL WAS A GOVERNMENT EMPLOYEE AND MR. NOR IS HE AN EMPLOYEE OF THE CONTRACTING AGENCY - THE COMP. WILL NOT QUESTION THE AWARD OF THE INSTANT CONTRACT. REVIEW OF THE CONTRACT WAS REQUESTED INASMUCH AS THE PRESIDENT OF HAMMOND-MITCHELL. IS EMPLOYED BY THE CORPS OF ENGINEERS. MITCHELL WAS A GOVERNMENT EMPLOYEE UNTIL AFTER THE AWARD OF THE CONTRACT. THAT HE IS NOT AN EMPLOYEE OF THE CORPORATION. TO SPECIFICALLY STATE WHETHER THEY ARE EMPLOYED BY THE GOVERNMENT. MITCHELL WAS NOT GOING TO SUPERVISE THE WORK PERSONALLY. CONTRACTS BETWEEN THE GOVERNMENT AND ITS EMPLOYEES ARE NOT PROHIBITED BY STATUTE EXCEPT WHERE AN EMPLOYEE OF THE GOVERNMENT ACTS AS AGENT BOTH FOR THE GOVERNMENT AND THE CONTRACTOR IN THE PARTICULAR TRANSACTION.

B-173988, NOV 22, 1971

CONTRACTS - GOVERNMENT EMPLOYEE'S COMPANY DECISION CONCERNING PROPRIETY OF CONTRACT BETWEEN THE FOREST SERVICE AND HAMMOND-MITCHELL, INC., PARTLY-OWNED BY A GOVERNMENT EMPLOYEE, MR. MITCHELL. GENERALLY, CONTRACTS BETWEEN THE GOVERNMENT AND ITS EMPLOYEES SHOULD NOT BE ENTERED INTO EXCEPT FOR THE MOST COGENT REASONS. HOWEVER, WHERE THE CONTRACTING OFFICER DID NOT KNOW THAT MR. MITCHELL WAS A GOVERNMENT EMPLOYEE AND MR. MITCHELL DOES NOT OWN A CONTROLLING SHARE OF THE COMPANY, NOR IS HE AN EMPLOYEE OF THE CONTRACTING AGENCY - THE COMP. GEN. WILL NOT QUESTION THE AWARD OF THE INSTANT CONTRACT.

TO MR. SECRETARY:

BY LETTER OF SEPTEMBER 28, 1971, THE CHIEF OF PROCUREMENT MANAGEMENT, ADMINISTRATIVE SERVICES, FOREST SERVICE, REQUESTED A REVIEW OF CONTRACT 01 -2357, AWARDED MARCH 29, 1971, TO HAMMOND-MITCHELL, INC., FOR THE REPAIR OF SUMMIT LAKE DAM, MONONGAHELA NATIONAL FOREST, GREENBRIER COUNTY, WEST VIRGINIA. REVIEW OF THE CONTRACT WAS REQUESTED INASMUCH AS THE PRESIDENT OF HAMMOND-MITCHELL, INC., MR. JOHN B. MITCHELL, IS EMPLOYED BY THE CORPS OF ENGINEERS, THUS BRINGING INTO QUESTION THE VALIDITY OF THE CONTRACT UNDER THE POLICY AGAINST CONTRACTS BETWEEN THE GOVERNMENT AND ITS EMPLOYEES.

ACCORDING TO THE CONTRACTING OFFICER'S REPORT, THE CONTRACTING OFFICER'S FIELD REPRESENTATIVE DID NOT LEARN THAT MR. MITCHELL WAS A GOVERNMENT EMPLOYEE UNTIL AFTER THE AWARD OF THE CONTRACT. IN A LETTER TO THE CONTRACTING OFFICER, DATED SEPTEMBER 21, 1971, MR. MITCHELL STATED THAT HE DOES NOT OWN A CONTROLLING INTEREST IN THE CORPORATION, THAT HE IS NOT AN EMPLOYEE OF THE CORPORATION, AND THAT HE DOES NOT RECEIVE A SALARY FROM IT. ADDITIONALLY, NOTHING IN THE BID DOCUMENTS REQUIRES BIDDERS, OR THOSE WITH AN INTEREST IN BIDDING CORPORATIONS, TO SPECIFICALLY STATE WHETHER THEY ARE EMPLOYED BY THE GOVERNMENT, AND THE PLAN AND EQUIPMENT QUESTIONNAIRE FOR ENGINEERING CONSTRUCTION SUBMITTED WITH THE BID INDICATES THAT MR. MITCHELL WAS NOT GOING TO SUPERVISE THE WORK PERSONALLY.

CONTRACTS BETWEEN THE GOVERNMENT AND ITS EMPLOYEES ARE NOT PROHIBITED BY STATUTE EXCEPT WHERE AN EMPLOYEE OF THE GOVERNMENT ACTS AS AGENT BOTH FOR THE GOVERNMENT AND THE CONTRACTOR IN THE PARTICULAR TRANSACTION. U.S.C. 208; 21 COMP. GEN. 705 (1942); 27 ID. 735 (1948). HOWEVER, BECAUSE CONTRACTS BETWEEN THE GOVERNMENT AND ITS EMPLOYEES ARE OPEN TO CRITICISM ON THE GROUNDS OF POSSIBLE FAVORITISM OR PREFERENTIAL TREATMENT, THEY SHOULD NOT BE ENTERED INTO EXCEPT FOR THE MOST COGENT REASONS. 4 COMP. GEN. 116 (1924); SEE ALSO 5 ID. 93 (1925); 14 ID. 403 (1934); 21 ID. 705 (1942); 25 ID. 690 (1946). THIS WELL-ESTABLISHED RULE IS CODIFIED IN THE AGRICULTURE PROCUREMENT REGULATIONS, 41 CFR 4-1.302-3, AND IS IMPLEMENTED BY SECTION 1-1.302 3(A) OF THE FEDERAL PROCUREMENT REGULATIONS WHICH PROVIDES THAT:

"CONTRACTS SHALL NOT KNOWINGLY BE ENTERED INTO BETWEEN THE GOVERNMENT AND EMPLOYEES OF THE GOVERNMENT OR BUSINESS CONCERNS OR ORGANIZATIONS WHICH ARE SUBSTANTIALLY OWNED OR CONTROLLED BY GOVERNMENT EMPLOYEES, EXCEPT FOR THE MOST COMPELLING REASONS, *** ."

THE RECORD INDICATES THAT THE CONTRACTING OFFICER DID NOT KNOW MR. MITCHELL WAS A GOVERNMENT EMPLOYEE AT TIME OF AWARD, AND IT FURTHER APPEARS THAT MR. MITCHELL DOES NOT HAVE A CONTROLLING INTEREST IN THE CORPORATION, AND THAT HE IS NOT AN EMPLOYEE OF THE CONTRACTING AGENCY. THIS CONNECTION, WE HAVE BEEN INFORMALLY ADVISED THAT MR. MITCHELL'S EMPLOYING AGENCY, THE CORP OF ENGINEERS, WAS NOT INVOLVED IN ANY WAY IN APPROVING THE AWARD OF THE CONTRACT, AND IS NOT INVOLVED IN THE ADMINISTRATION OF THE CONTRACT. WE HAVE ALSO BEEN ADVISED THAT THE CONTRACTOR IS NOW PERFORMING SATISFACTORILY UNDER THE CONTRACT.

IN VIEW OF THE FOREGOING, WE SEE NO VALID BASIS ON WHICH TO QUESTION THE AWARD IN THE PRESENT CASE TO HAMMOND-MITCHELL, INC. SEE B-153584, MAY 21, 1964.