B-18008, JULY 8, 1941, 21 COMP. GEN. 9

B-18008: Jul 8, 1941

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CONTRACTS - WALSH-HEALEY ACT APPLICABILITY - MANUFACTURE OF ARTICLES FROM GOVERNMENT-OWNED MATERIALS WHILE THERE IS DOUBT AS TO WHETHER CONTRACTS FOR MANUFACTURING ARTICLES FROM GOVERNMENT-OWNED MATERIALS. ARE CONTRACTS FOR THE "MANUFACTURE" OF ARTICLES AND SUPPLIES SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT. OR WHETHER THEY ARE CONTRACTS FOR . SINCE ADMINISTRATION OF THE ACT IS VESTED IN THE DEPARTMENT OF LABOR AND IN VIEW OF THE DOUBT IN THE MATTER. SUCH CONTRACTS WILL NOT BE QUESTIONED BY THIS OFFICE BY REASON OF THE INCLUSION OF THE PROVISIONS OF THE ACT PURSUANT TO THE DETERMINATION OF THE DEPARTMENT OF LABOR THAT IT IS APPLICABLE. 1941: I HAVE YOUR LETTER OF JUNE 16. AS FOLLOWS: REFERENCE IS MADE TO LETTER DATED MAY 19.

B-18008, JULY 8, 1941, 21 COMP. GEN. 9

CONTRACTS - WALSH-HEALEY ACT APPLICABILITY - MANUFACTURE OF ARTICLES FROM GOVERNMENT-OWNED MATERIALS WHILE THERE IS DOUBT AS TO WHETHER CONTRACTS FOR MANUFACTURING ARTICLES FROM GOVERNMENT-OWNED MATERIALS, EXCEPT FOR CERTAIN INCIDENTAL MATERIALS, ARE CONTRACTS FOR THE "MANUFACTURE" OF ARTICLES AND SUPPLIES SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT, OR WHETHER THEY ARE CONTRACTS FOR ,SERVICES" AND, THEREFORE, OUTSIDE THE ACT, SINCE ADMINISTRATION OF THE ACT IS VESTED IN THE DEPARTMENT OF LABOR AND IN VIEW OF THE DOUBT IN THE MATTER, SUCH CONTRACTS WILL NOT BE QUESTIONED BY THIS OFFICE BY REASON OF THE INCLUSION OF THE PROVISIONS OF THE ACT PURSUANT TO THE DETERMINATION OF THE DEPARTMENT OF LABOR THAT IT IS APPLICABLE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, JULY 8, 1941:

I HAVE YOUR LETTER OF JUNE 16, 1941, AS FOLLOWS:

REFERENCE IS MADE TO LETTER DATED MAY 19, 1941, FROM THE AUDIT DIVISION OF YOUR OFFICE RELATING TO THE FOLLOWING CONTRACTS:

W669-QM-10642 SUPREME FASHION CLOTHES CORP.

W669-QM-10656 SIGMUND EISNER COMPANY

THESE CONTRACTS COVER MANUFACTURE OF SERVICE WOOL COATS FROM GOVERNMENT- OWNED MATERIALS.

IT IS STATED THAT SUCH CONTRACTS APPEAR TO BE ESSENTIALLY FOR "SERVICES" AS DISTINGUISHED FROM ,SUPPLIES, ARTICLES, AND EQUIPMENT.' THE CONCLUSION IS REACHED THEREIN THAT THESE CONTRACTS ARE NOT PROPERLY SUBJECT TO THE WALSH-HEALEY ACT, AND THE PROVISIONS OF THAT ACT WERE IMPROPERLY INCLUDED.

THE DIVISION OF PUBLIC CONTRACTS OF THE DEPARTMENT OF LABOR HAS DETERMINED THAT CONTRACTS REQUIRING THE MANUFACTURE OF ARTICLES FROM GOVERNMENT-OWNED MATERIALS ARE TO BE CONSIDERED AS CONTRACTS FOR SUPPLIES, AND THAT THE PROVISIONS OF THE ACT ARE FOR APPLICATION.

INASMUCH AS THE TERMS OF THE ACT CHARGED THE SECRETARY OF LABOR WITH THE ADMINISTRATION THEREOF, THIS OFFICE HAS HERETOFORE FOLLOWED THE DETERMINATION OF THAT DEPARTMENT. THE PROVISIONS OF THE ACT HAVE BEEN INSERTED IN ALL ADVERTISEMENTS FOR BIDS WHEREIN ARTICLES WERE TO BE MANUFACTURED FROM GOVERNMENT-OWNED MATERIALS.

THUS THERE IS AN APPARENT CONFLICT BETWEEN THE DEPARTMENT OF LABOR AND THE AUDIT DIVISION OF YOUR OFFICE AS TO WHAT CONSTITUTES "SUPPLIES, ARTICLES AND EQUIPMENT" WITHIN THE CONTEMPLATION OF THE WALSH-HEALEY ACT. ACCORDINGLY, YOUR DECISION IS REQUESTED AS TO THE PROPER APPLICATION OF SAID ACT TO CONTRACTS FOR MANUFACTURING ARTICLES FROM GOVERNMENT-OWNED MATERIALS.

THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, PROVIDES, IN PART, AS FOLLOWS:

THAT IN ANY CONTRACT MADE AND ENTERED INTO BY ANY EXECUTIVE DEPARTMENT, INDEPENDENT ESTABLISHMENT, OR OTHER AGENCY OR INSTRUMENTALITY OF THE UNITED STATES * * * FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT IN ANY AMOUNT EXCEEDING $10,000, THERE SHALL BE INCLUDED THE FOLLOWING REPRESENTATIONS AND STIPULATIONS: * * *

EACH OF THE CONTRACTS REFERRED TO IN YOUR LETTER IS STATED TO COVER THE MANUFACTURE OF SERVICE WOOL COATS, IS FOR AN AMOUNT IN EXCESS OF $10,000, AND CONTAINS THE FOLLOWING PROVISIONS:

MATERIALS AND FINDINGS SPECIFIED IN INVITATION FOR BIDS NO. 669-41 NEG-37 TO BE FURNISHED BY THE GOVERNMENT * * *

ALL OTHER MATERIALS AND FINDINGS, INCLUDING ALL LABELS, MUST BE FURNISHED BY THE CONTRACTOR AND MUST CONFORM TO THE SPECIFICATIONS INDICATED.

SHEET NO. 4 OF THE CONTRACT SPECIFICATIONS, ATTACHED TO AND FORMING A PART OF EACH OF THE CONTRACTS, PROVIDES, IN PART, AS FOLLOWS:

FELT (INTERLINING); WADDING; THREAD, COTTON; THREAD, SILK; GIMP AND TAPE MUST BE FURNISHED BY THE CONTRACTOR * * *

SINCE IT APPEARED THAT MOST OF THE MATERIALS TO BE USED IN THE MANUFACTURE OF THE COATS WERE TO BE FURNISHED BY THE GOVERNMENT AND THAT THE CONTRACT PRICE APPARENTLY WAS BASED PRIMARILY ON THE SERVICES TO BE PERFORMED BY THE CONTRACTOR IN CONVERTING THE MATERIALS INTO COATS, THE AUDIT DIVISION OF THIS OFFICE QUESTIONED THE INCLUSION IN THE CONTRACTS OF THE PROVISIONS OF THE WALSH-HEALEY ACT ON THE THEORY THAT THE CONTRACTS APPEARED TO BE ESSENTIALLY FOR "SERVICES," AS DISTINGUISHED FROM CONTRACTS "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT," AND, THEREFORE, OUTSIDE THE ACT.

WHETHER THE CONTRACTS IN QUESTION ARE CONTRACTS "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT," PROPERLY SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT, OR WHETHER THEY ARE CONTRACTS FOR "SERVICES," AND NOT WITHIN THE CONTEMPLATION OF THE SAID ACT, IS A MATTER NOT FREE FROM DOUBT BUT AS TO WHICH SUBSTANTIAL ARGUMENTS MIGHT BE PRESENTED IN SUPPORT OF EITHER VIEW ADOPTED. IT WOULD APPEAR CLEAR THAT THE GREATER PART OF THE CONTRACT PRICES AND THE CONTRACTORS' RESPONSIBILITY UNDER THE CONTRACTS IS BASED UPON THE PERFORMANCE OF SERVICES WHICH WOULD INDICATE THAT THE CONTRACTS ESSENTIALLY ARE CONTRACTS FOR "SERVICES.' ON THE OTHER HAND, THE CONTRACTS EXPRESSLY ARE STATED TO BE FOR THE MANUFACTURE OF COATS AND THEY REQUIRE THE CONTRACTORS NOT ONLY TO CONVERT OR TRANSFORM GOVERNMENT-OWNED MATERIALS INTO FINISHED ARTICLES, BUT, ALSO, TO FURNISH CERTAIN MATERIAL NECESSARY TO THAT END.

IT APPEARS FROM YOUR LETTER THAT THE DEPARTMENT OF LABOR HAS RULED THAT SUCH CONTRACTS ARE CONSIDERED AS BEING SUBJECT TO THE PROVISIONS OF THE WALSH-HEALEY ACT. SINCE ADMINISTRATION OF THE SAID ACT IS VESTED IN THE DEPARTMENT OF LABOR AND SINCE THE QUESTION OF WHETHER THE CONTRACTS ARE FOR "SERVICES" OR ARE FOR THE "MANUFACTURE" OF ARTICLES OR SUPPLIES IS NOT FREE FROM DOUBT, THESE AND SIMILAR CONTRACTS WILL NOT HEREAFTER BE QUESTIONED BY THIS OFFICE BY REASON OF THE FACT THAT THEY INCLUDE THE PROVISIONS OF THE WALSH-HEALEY ACT PURSUANT TO THE DETERMINATION OF THE DEPARTMENT OF LABOR THAT THE SAID ACT IS APPLICABLE THERETO.