B-38155, NOVEMBER 30, 1943, 23 COMP. GEN. 395

B-38155: Nov 30, 1943

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ADVERTISING - CONCLUSIVENESS OF ADMINISTRATIVE DETERMINATIONS AS TO NONNECESSITY - REPRODUCTION OF MOTION PICTURE FILMS IN COLOR ADMINISTRATIVE CONCLUSIONS THAT A PARTICULAR FIRM WOULD HAVE AN ADVANTAGE IN COMPETITIVE BIDDING FOR THE PRODUCTION OF COLOR PRINTS OF A MOTION PICTURE FILM BY REASON OF ITS ASSOCIATION WITH THE PRODUCTION OF THE ORIGINAL FILM. THAT IT IS THE ONLY FIRM POSSESSING THE NECESSARY EQUIPMENT AND QUALIFICATIONS FOR SUCH WORK. 1943: I HAVE YOUR LETTER OF NOVEMBER 4. REQUESTING DECISION WHETHER ADVERTISING FOR BIDS IS REQUIRED UNDER SECTION 3709. IT IS STATED THAT SUCH FILM WAS PRODUCED BY HUGH HARMAN PRODUCTIONS. THAT SUCH PRODUCTION WAS ACCOMPLISHED UNDER A COOPERATIVE AGREEMENT BETWEEN THE CONTRACTOR AND THE TECHNICOLOR MOTION PICTURE CORPORATION OF HOLLYWOOD.

B-38155, NOVEMBER 30, 1943, 23 COMP. GEN. 395

ADVERTISING - CONCLUSIVENESS OF ADMINISTRATIVE DETERMINATIONS AS TO NONNECESSITY - REPRODUCTION OF MOTION PICTURE FILMS IN COLOR ADMINISTRATIVE CONCLUSIONS THAT A PARTICULAR FIRM WOULD HAVE AN ADVANTAGE IN COMPETITIVE BIDDING FOR THE PRODUCTION OF COLOR PRINTS OF A MOTION PICTURE FILM BY REASON OF ITS ASSOCIATION WITH THE PRODUCTION OF THE ORIGINAL FILM, AND THAT IT IS THE ONLY FIRM POSSESSING THE NECESSARY EQUIPMENT AND QUALIFICATIONS FOR SUCH WORK, DO NOT JUSTIFY AWARD OF A CONTRACT TO SUCH FIRM WITHOUT ADVERTISING FOR BIDS PURSUANT TO SECTION 3709, REVISED STATUTES.

COMPTROLLER GENERAL WARREN TO THE FEDERAL SECURITY ADMINISTRATOR, NOVEMBER 30, 1943:

I HAVE YOUR LETTER OF NOVEMBER 4, 1943, REQUESTING DECISION WHETHER ADVERTISING FOR BIDS IS REQUIRED UNDER SECTION 3709, REVISED STATUTES, IN CONNECTION WITH THE PROCUREMENT OF 175 PRINTS OF A CERTAIN MOTION PICTURE FILM IN COLOR "DEALING WITH THE DIAGNOSIS AND MANAGEMENT OF GONORRHEA.' IT IS STATED THAT SUCH FILM WAS PRODUCED BY HUGH HARMAN PRODUCTIONS, INC., THE LOW BIDDER ON AN INVITATION TO BID ISSUED JANUARY 4, 1943, BY THE PUBLIC HEALTH SERVICE AND SENT TO PRODUCERS OF ANIMATED CARTOON MOTION PICTURES, AND THAT SUCH PRODUCTION WAS ACCOMPLISHED UNDER A COOPERATIVE AGREEMENT BETWEEN THE CONTRACTOR AND THE TECHNICOLOR MOTION PICTURE CORPORATION OF HOLLYWOOD, CALIFORNIA, COVERING THE PHASE OF THE WORK INVOLVING THE USE OF TECHNICOLOR AS THE COLOR PROCESS. THE FACTS PERTINENT TO YOUR PRESENT INQUIRY ARE DESCRIBED IN YOUR LETTER AS FOLLOWS:

THE PUBLIC HEALTH SERVICE NOW DESIRES TO PURCHASE A TOTAL OF 175 PRINTS OF THIS SOUND FILM FOR THE PURPOSE OF INSTRUCTING ITS OWN MEDICAL PERSONNEL AND THAT OF STATE HEALTH DEPARTMENTS IN THE DIAGNOSIS AND MANAGEMENT OF GONORRHEA. OF THIS NUMBER, 150 PRINTS MUST BE 16 MM. AND 25 PRINTS MUST BE 35 MM. IN SIZE.

THIS MEDICAL TEACHING FILM IS THE ONLY ONE IN EXISTENCE ON THE SUBJECT OF GONORRHEA. AMONG THOSE WHO WILL RECEIVE INSTRUCTION FROM IT ARE PUBLIC HEALTH SERVICE MEDICAL OFFICERS ASSIGNED TO THE COAST GUARD, UNITED STATES MARINE HOSPITALS, THE WAR SHIPPING ADMINISTRATION AND STATE AND LOCAL HEALTH DEPARTMENTS. ALSO, PRINTS OF THE FILM WILL BE LENT TO STATE HEALTH DEPARTMENTS FOR INSTRUCTING PHYSICIANS IN PROGRAMS COOPERATING WITH THE PUBLIC HEALTH SERVICE. THEREFORE, IT IS OF PARAMOUNT IMPORTANCE THAT THE PRINTS EXEMPLIFY THE VERY HIGHEST TYPE OF COLOR PHOTOGRAPHY AND THAT THEY BE OF UNIFORM EXCELLENCE.

IT IS GENERALLY CONCEDED THROUGHOUT THE MOTION PICTURE INDUSTRY THAT THE TECHNICOLOR MOTION PICTURE CORPORATION OWNS THE ONLY COLOR PROCESS CAPABLE OF PRODUCING IDENTICAL PRINTS OF A CONSISTENTLY HIGH QUALITY FROM A GIVEN SET OF NEGATIVES, ALTHOUGH THERE IS AT LEAST ONE, AND POSSIBLY TWO FIRMS, OTHER THAN TECHNICOLOR, WHICH MAKE UP 35 MM. COLOR PRINTS. THE SURGEON GENERAL, AFTER CONSULTATION WITH MOTION PICTURE SPECIALISTS ATTACHED TO HIS STAFF AND AFTER INDEPENDENT STUDY, HAS DETERMINED THAT THE BEST INTERESTS OF THE UNITED STATES WOULD BE SERVED BY HAVING THESE 175 PRINTS MADE BY TECHNICOLOR--- WHICH HAS BEEN IDENTIFIED WITH THIS PARTICULAR FILM SINCE ITS INCEPTION--- RATHER THAN BY ANOTHER FIRM NOT IDENTIFIED WITH THE FILMING OF THE PICTURE. THE SURGEON GENERAL BELIEVES FURTHER THAT NO PRODUCER OTHER THAN TECHNICOLOR COULD TAKE NEGATIVES MADE BY TECHNICOLOR AND MANUFACTURE SATISFACTORILY BOTH 35 MM. AND 16 MM. PRINTS. BECAUSE OF THE DIFFICULTY OF OBJECTIVE DESCRIPTION OF ALL THE DIFFERENT COLOR GRADATIONS IN A CONTINUOUSLY PROJECTED IMAGE OF ORGANS OF THE HUMAN BODY UNDER NORMAL AND PATHOLOGICAL CONDITIONS, THE DRAFTING OF SPECIFICATIONS WHICH WOULD ASSURE THE GOVERNMENT OF A SATISFACTORY PRODUCT WOULD BE IMPRACTICABLE. FURTHERMORE, IN ANY COMPETITIVE BIDDING TECHNICOLOR WOULD BE AT A DISTINCT ADVANTAGE. BECAUSE OF ITS ASSOCIATION WITH THE HARMAN STUDIO DURING THE MAKING OF THE FILM, TECHNICOLOR NOW OWNS CERTAIN NEGATIVE MATERIALS, AS WELL AS CERTAIN DATA GATHERED FROM TESTS ON THE NEGATIVES THEMSELVES THAT WOULD NOT BE AVAILABLE TO COMPETITORS.

YOUR ADVICE IS REQUESTED AS TO WHETHER UNDER THESE CONDITIONS, SEC. 3709 OF THE REVISED STATUTES (41 U.S.C. SEC. 5) REQUIRES THE ISSUANCE OF INVITATIONS FOR BIDS ON FURNISHING THE 175 PRINTS OR WHETHER THE REQUIREMENTS OF THE STATUTE WOULD BE MET IF THE PUBLIC HEALTH SERVICE SHOULD PLACE THE ORDER WITH TECHNICOLOR WITHOUT INVITING COMPETITIVE BIDDING.

REFERENCE IS MADE IN YOUR LETTER TO CERTAIN DECISIONS OF THIS OFFICE -- SPECIFICALLY 16 COMP. GEN. 318, 19 ID. 523 AND 20 ID. 862--- INVOLVING SECTION 3709, REVISED STATUTES, BUT IT IS STATED THAT AN EXAMINATION OF SUCH DECISIONS HAS FAILED TO RESOLVE THE DOUBT IN THE INSTANT MATTER. THE FIRST DECISION CITED BY YOU, 16 COMP. GEN. 318, STATES AS A GENERAL PROPOSITION THAT CONCLUSIONS OR OPINIONS OF CONTRACTING OFFICERS THAT ONLY ONE MANUFACTURER CAN COMPLY WITH CERTAIN SPECIFICATIONS MAY NOT BE ACCEPTED AS CONTROLLING IN SUCH MATTERS, THE ONLY PRACTICABLE WAY OF DETERMINING SUCH FACT BEING TO ADVERTISE FOR BIDS. SEE, ALSO, 16 COMP. GEN. 171, 20 ID. 368; B-11505, APRIL 18, 1941. THE LIMITED NATURE OF THE PERMISSIBLE EXERCISE OF ADMINISTRATIVE DISCRETION IN SUCH MATTERS IS REFERRED TO IN THE CASE OF UNITED STATES V. PURCELL ENVELOPE COMPANY, 249 U.S. 313, 318, AS FOLLOWS:

* * * THERE MUST BE A POINT OF TIME AT WHICH DISCRETION IS EXHAUSTED. THE PROCEDURE FOR THE ADVERTISING FOR BIDS FOR SUPPLIES OR SERVICES TO THE GOVERNMENT WOULD ELSE BE A MOCKERY--- A PROCEDURE, WE MAY SAY, THAT IS NOT PERMISSIVE BUT REQUIRED (SEC. 3709, REV. STAT.). BY IT THE GOVERNMENT IS GIVEN THE BENEFIT OF THE COMPETITION OF THE MARKET AND EACH BIDDER IS GIVEN THE CHANCE FOR A BARGAIN. IT IS A PROVISION, THEREFORE, IN THE INTEREST OF BOTH GOVERNMENT AND BIDDER, NECESSARILY GIVING RIGHTS TO BOTH AND PLACING OBLIGATIONS ON BOTH. AND IT IS NOT OUT OF PLACE TO SAY THAT THE GOVERNMENT SHOULD BE ANIMATED BY A JUSTICE AS ANXIOUS TO CONSIDER THE RIGHTS OF THE BIDDER AS TO INSIST UPON ITS OWN. AND, WE REPEAT, THERE MUST BE SOME POINT AT WHICH DISCRETION CEASES AND OBLIGATION TAKES ITS PLACE. * * * ON THE OTHER HAND, IT HAS BEEN HELD, AS POINTED OUT IN YOUR LETTER, THAT WHERE IT IS CLEARLY ESTABLISHED THAT ADVERTISING FOR BIDS WOULD SERVE NO USEFUL PURPOSE, AS IN THE PURCHASE OF PATENTED OR COPYRIGHTED ARTICLES, PROCUREMENT OF THE GOODS WITHOUT COMPETITIVE BIDS IS AUTHORIZED. 2 COMP. DEC. 632; 1 COMP. GEN. 748; 5 ID. 963; 7 ID. 282; 17 OP. ATTY. GEN. 684. CF. 14 COMP. DEC. 328; 22 ID. 302; 16 COMP. GEN. 777.

IT IS UNDERSTOOD FROM YOUR LETTER THAT BY VIRTUE OF THE PRIOR ASSOCIATION OF TECHNICOLOR CORPORATION WITH THE PRODUCTION OF THIS FILM, SUCH CORPORATION NOW OWNS "CERTAIN NEGATIVE MATERIALS, AS WELL AS CERTAIN DATA GATHERED FROM TESTS ON THE NEGATIVES THEMSELVES THAT WOULD NOT BE AVAILABLE TO COMPETITORS.' HOWEVER, IT IS NOT UNDERSTOOD THAT THE EXCLUSIVE POSSESSION OF SUCH MATERIALS AND DATA BY TECHNICOLOR CORPORATION HAS A PROPRIETARY INTEREST IN THE FILM SUCH AS WOULD RENDER ACTIONABLE THE PRODUCTION OF PRINTS BY OTHER THAN SAID CORPORATION. THUS, DECISIONS INVOLVING SOLE SOURCES OF SUPPLY DUE TO THE EXISTENCE OF PATENTS OR COPYRIGHTS APPEAR TO HAVE NO DIRECT APPLICATION TO THE INSTANT CASE.

IN 19 COMP. GEN. 523, THE QUESTION WAS WHETHER A CONTRACT TO MANAGE AND OPERATE PROPERTY UNDER CONTROL OF THE FEDERAL HOUSING ADMINISTRATION COULD BE CONSUMMATED WITH AN INDIVIDUAL OR FIRM KNOWN TO BE EXPERIENCED IN SUCH TYPE OF OPERATION WITHOUT RESORTING TO PUBLIC BIDDING UNDER SECTION 3709, REVISED STATUTES. THIS OFFICE RECOGNIZED THAT SUCH WORK INVOLVED TO A HIGH DEGREE THE ELEMENTS OF PERSONAL QUALIFICATIONS OF THOSE TO BE CHARGED WITH RESPONSIBILITY FOR ITS SUCCESSFUL ACCOMPLISHMENT AND HELD THAT "IT MAY BE CONSIDERED THAT THERE HAS BEEN COMPLIANCE WITH SAID SECTION 3709, REVISED STATUTES, IF IN ANY GIVEN CASE BIDS BE ASKED OF ONLY THOSE PERSONS OR CONCERNS FOUND TO BE RESPONSIBLE, COMPETENT, CAPABLE, ADEQUATELY EQUIPPED AND PREPARED TO RENDER SUCH SERVICES TO THE ADMINISTRATION SATISFACTORILY IN THE CITY OR TOWN WHERE SUCH PROPERTY MAY BE LOCATED, THE CONTRACT, IF THE BID BE OTHERWISE PROPER, TO BE AWARDED TO THE LOWEST OF SUCH SELECTED BIDDERS.' BUT WHAT WAS SAID AND CONCLUDED THEREIN WITH RESPECT TO "MANAGEMENT CONTRACTS" IS HARDLY GERMANE TO CONTRACT FOR THE PRODUCTION OF PRINTS OF A MOTION PICTURE FILM.

IT IS STATED THAT IN ANY COMPETITIVE BIDDING, TECHNICOLOR CORPORATION WOULD BE AT A DISTINCT ADVANTAGE. BUT SUCH FACT--- IF IT BE A FACT--- IS NOT CONSIDERED SUFFICIENT TO WARRANT THE CONCLUSION THAT ADVERTISING FOR BIDS WOULD SERVE NO USEFUL PURPOSE. THE ONLY WAY TO DETERMINE THE EXTENT OF SUCH ADVANTAGE AND THE CONSEQUENT BENEFIT TO THE GOVERNMENT DERIVING THEREFROM, WOULD APPEAR TO BE TO ADVERTISE FOR BIDS. NOR DOES THERE APPEAR TO BE AN "EXIGENCY" IN CONNECTION WITH THE PROCUREMENT OF THESE PRINTS SUCH AS MIGHT JUSTIFY A FAILURE TO SOLICIT BIDS. SEE, IN THIS CONNECTION, 14 COMP. GEN. 875, AND AUTHORITIES CITED THEREIN. IN OTHER WORDS, THE SOLE BASIS FOR THE PROPOSAL TO DISPENSE WITH ADVERTISING IN THE INSTANT CASE IS THE OPINION OF THE SURGEON GENERAL THAT THE TECHNICOLOR MOTION PICTURE CORPORATION IS THE ONLY FIRM IN THE UNITED STATES WHICH POSSESSES THE NECESSARY EQUIPMENT AND THE REQUISITE QUALIFICATIONS TO PRODUCE SUCCESSFULLY THE 175 PRINTS IN QUESTION. AND, CONSIDERED IN THAT LIGHT, THE INSTANT CASE FALLS SQUARELY WITHIN THE PRINCIPLE STATED IN 16 COMP. GEN. 318, SUPRA, NAMELY, THAT THERE MAY NOT BE ACCEPTED AS CONTROLLING IN SUCH MATTERS, ADMINISTRATIVE DETERMINATIONS BASED SOLELY UPON OPINION OR HEARSAY THAT ONLY ONE MANUFACTURER OR SUPPLIER POSSESSES THE NECESSARY QUALIFICATIONS TO PERFORM CERTAIN WORK OR FURNISH CERTAIN SUPPLIES.

ACCORDINGLY, YOU ARE ADVISED THAT UPON THE FACTS STATED IN YOUR LETTER, BIDS SHOULD BE SOLICITED AND THE AWARD OF CONTRACT MADE TO THE LOW BIDDER POSSESSING THE NECESSARY QUALIFICATIONS FOR THE WORK ..END :