B-178659, FEB 22, 1974, 53 COMP GEN 616

B-178659, FEB 22, 1974, 53 COMP GEN 616

MILITARY PERSONNEL - RETIRED - CONTRACTING WITH GOVERNMENT - SALES ACTIVITIES - RETIRED PAY WITHHOLDING A RETIRED REGULAR AIR FORCE OFFICER ENGAGED IN THE SALE OF ELECTRICAL EQUIPMENT WHOSE BUSINESS ACTIVITIES INCLUDED MAKING CALLS ON DEPARTMENT OF DEFENSE (DOD) AGENCIES, AS WELL AS AN INSTALLATION OF THE NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION, FOR THE PURPOSE OF RENDERING TECHNICAL ASSISTANCE, UPDATING CATALOGUE MATERIALS, PROVIDING INFORMATION ON THE COMPANIES HE REPRESENTED AND THEIR PRODUCTS, DETERMINING FUTURE MARKETS, AND CONTRACTING GOVERNMENT PURCHASING AGENTS IS CONSIDERED AS ACTIVELY PARTICIPATING IN THE PROCUREMENT PROCESS FOR THE PURPOSE OF OBTAINING BUSINESS FOR HIS EMPLOYER AND SUCH PARTICIPATION CONSTITUTES SALES ACTIVITIES IN VIOLATION OF 37 U.S.C. 801(C) AND DOD DIRECTIVE 5500.7, AUGUST 8, 1967, NOTWITHSTANDING THE MEMBER'S CONTENTION THAT A MAJORITY OF THE CALLS WERE MADE IN RESPONSE TO INQUIRIES FOR TECHNICAL INFORMATION AND, THEREFORE, THE PAYMENT OF RETIRED PAY TO THE MEMBER DURING THE PERIOD OF PARTICIPATION IN THE PROCUREMENT PROCESS IS PRECLUDED.

TO N.R. BRENINGSTALL, DEPARTMENT OF THE AIR FORCE, FEBRUARY 22, 1974:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED APRIL 20, 1973 (FILE REFERENCE RPTT), WITH ENCLOSURES, REQUESTING AN ADVANCE DECISION AS TO WHETHER THE BUSINESS ACTIVITIES ENGAGED IN BY LIEUTENANT COLONEL BEN C. HILL, JR., USAF, RETIRED, SSAN XXX-XX-XXXX, DURING THE PERIOD MARCH 22, 1972, THROUGH SEPTEMBER 8, 1972, CONSTITUTE "SELLING" WITHIN THE MEANING OF 37 U.S.C. 801(C) SO AS TO PRECLUDE PAYMENT OF RETIRED PAY FOR THAT PERIOD. YOUR LETTER WAS FORWARDED TO THIS OFFICE BY LETTER FROM THE OFFICE OF THE DEPUTY ASSISTANT COMPTROLLER FOR ACCOUNTING AND FINANCE OF THE AIR FORCE DATED MAY 11, 1973 (FILE REFERENCE ACF), AND HAS BEEN ASSIGNED AIR FORCE REQUEST NO. DO-AF-1189 BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE.

YOU SAY THAT COLONEL HILL RETIRED FROM THE UNITED STATES AIR FORCE AS A REGULAR OFFICER, EFFECTIVE JULY 31, 1971, AND IS RECEIVING RETIRED PAY IN THE AMOUNT OF $749.13 MONTHLY. FURTHER, THAT ON JULY 5, 1972, HE SUBMITTED A DD FORM 1357, STATEMENT OF EMPLOYMENT, WHICH INDICATED THAT HE WAS EMPLOYED AS A SALESMAN BY THE ROY E. COULSON COMPANY, A FIRM WHICH REPRESENTS COMPANIES IN THE SALE OF INDUSTRIAL ELECTRICAL EQUIPMENT. HOWEVER, HE GAVE ASSURANCES THAT HIS POSITION DID NOT ENTAIL SELLING TO THE GOVERNMENT AS PROHIBITED BY 37 U.S.C. 801(C).

YOU SAY THAT UPON REVIEW OF HIS STATEMENT OF EMPLOYMENT, IT APPEARED THAT THE MEMBER WAS INVOLVED IN SELLING TO CERTAIN DEPARTMENT OF DEFENSE AGENCIES. THEREFORE, ON AUGUST 31, 1972, A LETTER WAS SENT TO HIM REQUESTING MORE SPECIFIC INFORMATION ON WHICH TO EVALUATE HIS SITUATION.

IN HIS REPLY, COLONEL HILL SUBMITTED A LIST OF THE GOVERNMENT AGENCIES ON WHICH HE HAD MADE CALLS IN HIS CAPACITY AS SALESMAN FOR THE ROY E. COULSON COMPANY, AND CALLED ATTENTION TO THE FACT THAT A MAJORITY OF THE CALLS WERE MADE IN RESPONSE TO FACTORY INQUIRIES OR TO REQUESTS BY THE AGENCIES CONCERNED. SPECIFICALLY HE STATED THAT THEY WERE MADE: (1) TO ASCERTAIN WHETHER INSTALLED EQUIPMENT WAS OPERATING PROPERLY; (2) TO BE OF ASSISTANCE IF TROUBLES WERE ENCOUNTERED WITH INSTALLED EQUIPMENT; (3) TO UPDATE EXISTING CATALOGUE MATERIALS; AND (4) TO PROVIDE REQUESTED INFORMATION ON THE COMPANIES THE ROY E. COULSON COMPANY REPRESENTED AND THEIR PRODUCTS. HOWEVER, HE ALSO STATED THAT SOME CALLS WERE MADE TO ASCERTAIN THE EXISTENCE OF POTENTIAL MARKETS AND TO INTRODUCE HIMSELF TO GOVERNMENT PURCHASING AGENTS.

YOU INDICATE THAT THE SUBMITTED LIST INCLUDED FIVE DEPARTMENT OF DEFENSE AGENCIES AS WELL AS THE ALBUQUERQUE SEISMOLOGICAL CENTER, WHICH YOU SAY IS AN INSTALLATION OF THE NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION (NOAA) WHICH, IN TURN, IS THE FORMER ENVIRONMENTAL SCIENCE SERVICES ADMINISTRATION (ESSA), TO WHICH THE RETIRED PAY PAYMENT PROHIBITION OF 37 U.S.C. 801(C) IS APPLICABLE.

FURTHER, THAT BY LETTER DATED OCTOBER 30, 1972, THE MEMBER ADVISED YOU THAT HE HAD TERMINATED ALL CALLS ON UNITED STATES GOVERNMENT AGENCIES OF ANY SORT AND BY LETTERS DATED NOVEMBER 20 AND 24, 1972, THE PRESIDENT OF THE ROY E. COULSON COMPANY ADVISED THAT ALL GOVERNMENT CONTACTS WERE REMOVED FROM THE DUTIES OF THE MEMBER AS OF SEPTEMBER 8, 1972.

SECTION 801(C) OF TITLE 37, U.S. CODE, PROVIDES IN PERTINENT PART THAT:

PAYMENT MAY NOT BE MADE FROM ANY APPROPRIATION, FOR A PERIOD OF THREE YEARS AFTER HIS NAME IS PLACED ON THAT LIST, TO AN OFFICER ON A RETIRED LIST OF THE *** REGULAR AIR FORCE *** WHO IS ENGAGED FOR HIMSELF OR OTHERS IN SELLING, OR CONTRACTING OR NEGOTIATING TO SELL, SUPPLIES OR WAR MATERIALS TO AN AGENCY OF THE DEPARTMENT OF DEFENSE, THE COAST GUARD, THE ENVIRONMENTAL SCIENCE SERVICES ADMINISTRATION, OR THE PUBLIC HEALTH SERVICE.

PARAGRAPH I.C.2 OF INCLOSURE 3-C, DEPARTMENT OF DEFENSE DIRECTIVE NUMBER 5500.7, DATED AUGUST 8, 1967, DEFINES "SELLING" FOR THE PURPOSES OF THAT SECTION, AS:

A. SIGNING A BID, PROPOSAL, OR CONTRACT;

B. NEGOTIATING A CONTRACT;

C. CONTACTING AN OFFICER OR EMPLOYEE OF ANY OF THE FOREGOING DEPARTMENTS OR AGENCIES FOR THE PURPOSE OF:

(1) OBTAINING OR NEGOTIATING CONTRACTS,

(2) NEGOTIATING OR DISCUSSING CHANGES IN SPECIFICATIONS, PRICE, COST ALLOWANCES, OR OTHER TERMS OF A CONTRACT, OR

(3) SETTLING DISPUTES CONCERNING PERFORMANCE OF A CONTRACT, OR

D. ANY OTHER LIAISON ACTIVITY WITH A VIEW TOWARD THE ULTIMATE CONSUMMATION OF A SALE ALTHOUGH THE ACTUAL CONTRACT THEREFORE IS SUBSEQUENTLY NEGOTIATED BY ANOTHER PERSON.

PARAGRAPH I.C.2 OF INCLOSURE 3-C, ALSO STATES THAT IT IS NOT THE INTENT OF THE DIRECTIVE TO PRECLUDE A RETIRED REGULAR OFFICER FROM ACCEPTING EMPLOYMENT WITH PRIVATE INDUSTRY SOLELY BECAUSE HIS EMPLOYER IS A CONTRACTOR WITH THE GOVERNMENT.

WE HAVE HELD GENERALLY THAT THE EMPLOYMENT OF RETIRED REGULAR OFFICERS IN NONSALES, EXECUTIVE OR ADMINISTRATIVE POSITIONS, INCLUDING CONTACTS BY A RETIRED OFFICER IN HIS CAPACITY AS A NONCONTRACTING TECHNICAL SPECIALIST WHICH INVOLVES NO SALES ACTIVITIES, IS OUTSIDE THE PURVIEW OF THE STATUTE AND THE DOD DIRECTIVE. SEE 41 COMP. GEN. 784 (1962); 41 ID. 799 (1962); 42 ID. 87 (1962); 42 ID. 236 (1962); AND 52 ID. 3 (1972). HOWEVER, THIS OFFICE HAS TAKEN THE POSITION THAT WHERE A RETIRED OFFICER ACTUALLY PARTICIPATES IN SOME PHASE OF THE PROCUREMENT PROCESS, IT HAS BEEN HELD THAT SUCH ACTIVITIES BRING HIM WITHIN THE PURVIEW OF THE DEFINITION OF "SELLING" AS DEFINED IN THE DOD DIRECTIVE. SEE FOR EXAMPLE, 42 COMP. GEN. 32 (1962); 42 ID. 236, SUPRA; AND 43 ID. 408 (1963).

IN THE INSTANT CASE, THE PURPOSE OF SEVERAL OF COLONEL HILL'S CALLS WAS TO INTRODUCE HIMSELF TO PURCHASING AGENTS AND TO ASCERTAIN THE EXISTENCE OF A FUTURE PRODUCT APPLICATION. IN 40 COMP. GEN. 511 (1961), AFTER CITING THE DECISION OF THE COURT OF CLAIMS IN SEASTROM V. UNITED STATES, 147 CT. CL. 453 (1959), WHICH HELD THAT A DEMONSTRATION OF DRUGS TO VARIOUS NAVAL FACILITIES BY A RETIRED NAVAL OFFICER WAS SALES ACTIVITIES OF THE TYPE PROSCRIBED BY STATUTE, WE EXPRESSED THE VIEW THAT:

WE DO NOT PERCEIVE MUCH DIFFERENCE ESSENTIALLY BETWEEN DEMONSTRATIONS OF PRODUCTS FOR SALE AND CONTACTS MADE FOR THE PURPOSE OF DETERMINING THE REQUIREMENTS OF THE NAVY FOR PRODUCTS WHICH AN EMPLOYER MAY DESIRE TO MANUFACTURE FOR THE NAVY. DISCUSSIONS HELD IN SUCH CONTACTS MAY FORM THE VERY FOUNDATION UPON WHICH THE FINAL CONTRACT IS BASED, PARTICULARLY WHEN NEGOTIATED CONTRACTS CONSTITUTE A HIGH PERCENTAGE OF NAVY PROCUREMENT VOLUME. THE STATUTE IS DIRECTED NOT ONLY AT FAVORITISM, BUT AT CONDUCT THAT TEMPTS FAVORITISM. A NOT UNLIKELY RESULT OF SUCH CONTACTS BY A HIGH RANKING RETIRED OFFICER IS THE AWARD OF NAVY CONTRACTS, EVEN THOUGH THE RETIRED OFFICER DOES NOT PARTICIPATE IN THE CONTRACT NEGOTIATIONS. WHERE A CONTACT ULTIMATELY RIPENS INTO A CONTRACT, IT CANNOT BE REALISTICALLY SAID THAT THE CONTACT AND SUBSEQUENT EVENTS WERE NOT INTERRELATED AND INTERCONNECTED.

FURTHER, IN 49 COMP. GEN. 85 (1969), WE FOUND THE PROPOSED SELF EMPLOYMENT OF A RETIRED AIR FORCE OFFICER AS A SMALL BUSINESS REPRESENTATIVE TO CONSTITUTE "SELLING" TO THE GOVERNMENT WITHIN THE MEANING OF ITEM (D) OF PARAGRAPH I.C.2 OF INCLOSURE 3-C, DEPARTMENT OF DEFENSE DIRECTIVE NUMBER 5500.7. THERE, THE OFFICER'S PROPOSED DUTIES WERE TO INCLUDE: VISITING GOVERNMENT AGENCIES TO GATHER INFORMATION REGARDING THEIR NEEDS FOR INDUSTRIAL AND AEROSPACE PRODUCTS; DETERMINING WHICH OF HIS CLIENTS WAS CAPABLE OF MANUFACTURING THE REQUIRED PRODUCTS; AND RELATING THIS INFORMATION BACK TO GOVERNMENT PURCHASING AGENTS. STATED THEREIN THAT:

*** SINCE THE ONLY PURPOSE OF ANY CONTACTS MADE BY (THE MEMBER) WITH DEPARTMENT OF DEFENSE PERSONNEL FOR THE PURPOSE OF ASCERTAINING WHETHER THE NEEDS OF THE DEPARTMENT CAN BE SUPPLIED BY HIS MANUFACTURERS IS TO OBTAIN BUSINESS FOR THEM, THERE WOULD APPEAR TO BE A SUBSTANTIAL BASIS FOR REGARDING SUCH CONTACTS AS LIAISON ACTIVITIES WITH A VIEW TOWARDS THE ULTIMATE CONSUMMATION OF A SALE ***.

BASED ON COLONEL HILL'S DESCRIPTION OF HIS EMPLOYMENT DUTIES AND THE EXTENT OF THE CONTACTS MADE WITH THE AGENCIES, IT SEEMS REASONABLE TO CONCLUDE THAT HIS CONTACTS WITH DEFENSE DEPARTMENT PURCHASING AGENTS WERE FOR THE PURPOSE OF OBTAINING BUSINESS FOR HIS CLIENTS. IN THIS RESPECT, WE DO NOT BELIEVE THAT COLONEL HILL'S STATEMENT THAT THE MAJORITY OF HIS CALLS WERE MADE IN RESPONSE TO INQUIRIES FOR TECHNICAL INFORMATION IS RELEVANT. WE HAVE STATED THAT WHERE CONTACTS WITH DOD PERSONNEL ARE FOUND TO CONSTITUTE SALES ACTIVITY WITHIN THE MEANING OF THE DOD DIRECTIVE AND 37 U.S.C. 801(C), THE STATUTORY PROSCRIPTIONS APPLY REGARDLESS OF WHETHER CONTACTS HAVE BEEN FREQUENT OR INFREQUENT. CF. 41 COMP. GEN. 642 (1962).

ACCORDINGLY, IT IS OUR VIEW THAT COLONEL HILL'S CONTACTS WITH THE LISTED AGENCIES DURING THE PERIOD FROM MARCH 22, 1972, THROUGH SEPTEMBER 8, 1972, CONSTITUTE "SELLING" IN VIOLATION OF 37 U.S.C. 801 (C) AND PRECLUDE THE PAYMENT OF RETIRED PAY FOR THAT PERIOD.