B-8296, FEBRUARY 20, 1940, 19 COMP. GEN. 735

B-8296: Feb 20, 1940

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CONTRACTS - AWARDS - UNLICENSED CONTRACTORS A BID FOR CONSTRUCTION OF A FEDERAL GOVERNMENT PROJECT IN THE STATE OF NEW MEXICO MAY NOT BE REJECTED SOLELY BECAUSE THE BIDDER IS NOT A LICENSED CONTRACTOR UNDER A STATUTE OF THAT STATE DECLARING IT UNLAWFUL FOR ANY CONTRACTOR TO "OFFER TO ACT IN THE CAPACITY OR PURPORT TO HAVE THE CAPACITY OF CONTRACTOR" WITHIN THE SAID STATE WITHOUT HAVING A LICENSE THEREFOR. THERE IS NO AUTHORITY TO ACCEPT A BID CONDITIONED ON THE UNITED STATES DEFENDING ANY ACTION WHICH THE STATE MIGHT TAKE AGAINST AN UNLICENSED CONTRACTOR. 1940: I HAVE YOUR LETTER OF JANUARY 27. AS FOLLOWS: TRANSMITTED HEREWITH IS A COPY OF A LETTER DATED DECEMBER 9. WHICH ARE SELF EXPLANATORY.

B-8296, FEBRUARY 20, 1940, 19 COMP. GEN. 735

CONTRACTS - AWARDS - UNLICENSED CONTRACTORS A BID FOR CONSTRUCTION OF A FEDERAL GOVERNMENT PROJECT IN THE STATE OF NEW MEXICO MAY NOT BE REJECTED SOLELY BECAUSE THE BIDDER IS NOT A LICENSED CONTRACTOR UNDER A STATUTE OF THAT STATE DECLARING IT UNLAWFUL FOR ANY CONTRACTOR TO "OFFER TO ACT IN THE CAPACITY OR PURPORT TO HAVE THE CAPACITY OF CONTRACTOR" WITHIN THE SAID STATE WITHOUT HAVING A LICENSE THEREFOR, BUT THERE IS NO AUTHORITY TO ACCEPT A BID CONDITIONED ON THE UNITED STATES DEFENDING ANY ACTION WHICH THE STATE MIGHT TAKE AGAINST AN UNLICENSED CONTRACTOR, IRRESPECTIVE OF WHAT ACTION THE GOVERNMENT MIGHT DIRECTLY TAKE, IN ITS OWN INTERESTS AND ON ITS OWN BEHALF, TO SECURE THE UNOBSTRUCTED AND ORDERLY PROSECUTION OF ITS BUSINESS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, FEBRUARY 20, 1940:

I HAVE YOUR LETTER OF JANUARY 27, 1940, AS FOLLOWS:

TRANSMITTED HEREWITH IS A COPY OF A LETTER DATED DECEMBER 9, 1939, FROM J. J. BOLLINGER CONSTRUCTION COMPANY, OF OKLAHOMA CITY, OKLAHOMA, TOGETHER WITH COPY OF A LETTER THAT COMPANY RECEIVED FROM THE NEW MEXICO CONTRACTORS' LICENSING BOARD, DATED DECEMBER 7, 1939, WHICH ARE SELF EXPLANATORY. THERE ARE ALSO ENCLOSED COPIES OF THE ACTING PURCHASING OFFICER'S WIRE, DATED DECEMBER 13, 1939, REPLYING TO J. J. BOLLINGER CONSTRUCTION COMPANY, AND A COPY OF A LETTER ADDRESSED TO THE STATE REGISTRAR, NEW MEXICO CONTRACTORS' LICENSING BOARD, UNDER DATE OF DECEMBER 8, BY THE OFFICE OF THE ATTORNEY GENERAL OF THE UNITED STATES.

A BID FOR CONSTRUCTION OF THE PROJECT IN QUESTION WAS RECEIVED FROM J. J. BOLLINGER CONSTRUCTION COMPANY AND OPENED ON DECEMBER 15, 1939.

ATTACHED TO A BID RECEIVED AT THE SAME TIME FROM DAVID A. OLSON OF DENVER, COLORADO, FOR CONSTRUCTION OF THE SAME PROJECT, WAS FOUND A COPY OF A LETTER FROM THE NEW MEXICO CONTRACTORS' LICENSING BOARD IDENTICAL IN CONTENTS TO THAT RECEIVED BY J. J. BOLLINGER CONSTRUCTION COMPANY; ALSO A CONDITIONAL CLAUSE IN THE BID READING AS FOLLOWS:

"THIS PROPOSAL IS SUBMITTED ON THE CONDITION THAT THE STATE OF NEW MEXICO WILL ISSUE ME A LICENSE, AND THAT THE OWNER WILL DEFEND ANY LEGAL ACTIONS OCCASIONED BY THE MATTERS SET FORTH IN THE ACCOMPANYING COPY OF LETTER FROM THE NEW MEXICO CONTRACTORS' LICENSING BOARD.'

IN THE PRESENT INSTANCE NEITHER OF THE ABOVE-MENTIONED BIDS IS THE LOWEST AS TO PRICE QUOTED, BUT IT IS ENTIRELY POSSIBLE THAT BIDDERS FROM OTHER STATES, AND UNLICENSED IN NEW MEXICO, MAY BE LOW ON UNITED STATES CONSTRUCTION PROJECTS IN THAT STATE ON FUTURE ADVERTISEMENTS. IT IS ALSO QUITE POSSIBLE THAT THE STATE BOARD MAY REFUSE TO ISSUE A LICENSE TO A CONTRACTOR WHOSE BID IS LOW BUT WHO HAD SUBMITTED HIS BID BEFORE APPLYING FOR THE LICENSE. THIS CONCLUSION IS DRAWN FROM THE STATE REGISTRAR'S STATEMENT TO THE BOLLINGER COMPANY THAT IF THAT COMPANY SUBMITTED A BID "WE WILL BE FORCED TO LODGE A COMPLAINT AGAINST YOU FOR VIOLATION OF OUR STATE LICENSING LAW.'

YOUR DECISION IS THEREFORE REQUESTED AS TO WHETHER THE BID OF AN UNLICENSED CONTRACTOR SHOULD BE CONSIDERED WHEN SUBMITTED FOR CONSTRUCTION OF A GOVERNMENT PROJECT IN THE STATE OF NEW MEXICO, AND, ALSO, ESPECIALLY WHEN SUCH A BID CARRIES A CONDITIONAL CLAUSE THAT MIGHT OBLIGATE THE GOVERNMENT TO TAKE PART IN LEGAL ACTION TOWARD DEFENDING THE BIDDER.

THE LAWS OF NEW MEXICO, 1939, CHAPTER 197, PAGES 474-475 ( HOUSE BILL NO. 96, APPROVED MARCH 16, 1939), PROVIDE, INSOFAR AS HERE PERTINENT, AS FOLLOWS:

SECTION 1. NECESSITY FOR SECURING LICENSES.--- IT SHALL BE UNLAWFUL FOR ANY PERSON, FIRM, COPARTNERSHIP, CORPORATION, ASSOCIATION OR OTHER ORGANIZATION, OR ANY COMBINATION OF ANY THEREOF, TO ENGAGE IN THE BUSINESS OR ACT OR OFFER TO ACT IN THE CAPACITY OR PURPORT TO HAVE THE CAPACITY OF CONTRACTOR WITHIN THIS STATE WITHOUT HAVING A LICENSE THEREFOR AS HEREIN PROVIDED, UNLESS SUCH PERSON, FIRM, COPARTNERSHIP, CORPORATION, ASSOCIATION, OR OTHER ORGANIZATION IS PARTICULARLY EXEMPT AS PROVIDED IN THIS ACT. EVIDENCE OF THE SECURING OF ANY PERMIT FROM A GOVERNMENTAL AGENCY OR THE EMPLOYMENT OF ANY PERSON ON A CONSTRUCTION PROJECT SHALL BE ACCEPTED IN ANY COURT AS PRIMA FACIE EVIDENCE OF THE EXISTENCE OF A CONTRACT. OTHER PROVISIONS OF THE STATUTE RELATE TO THE ISSUANCE, REVOCATION, SUSPENSION AND CANCELLATION OF LICENSES AND IMPOSE PENALTIES FOR VIOLATION OF THE ACT.

IT IS NOTED THE SAID ACT DECLARES IT TO BE UNLAWFUL FOR ANY CONTRACTOR TO "OFFER TO ACT IN THE CAPACITY OR PURPORT TO HAVE THE CAPACITY OF CONTRACTOR" WITHIN THE STATE OF NEW MEXICO WITHOUT HAVING A LICENSE THEREFOR, THUS INDICATING AN ATTEMPT TO CONTROL THE BIDDING AND CONTRACTING ACTIVITIES WITHIN THE STATE OF PERSONS, FIRMS, ETC., WITHOUT THE STATE OF NEW MEXICO AND NOT SUBJECT TO ITS JURISDICTION AS WELL AS OF THOSE RESIDING WITHIN THE STATE. IN THIS CONNECTION SEE BALDWIN V. SEELIG, 294 U.S. 511, AND ST. LOUIS COMPRESS CO. V. ARKANSAS, 260 U.S. 346, WHEREIN IT WAS HELD, IN EFFECT, THAT A STATE MAY NOT SO PROJECT ITS LEGISLATION OUTSIDE ITS TERRITORIAL LIMITS AS TO REGULATE OR INTERFERE WITH WHAT CONTRACTORS, NOT SUBJECT TO ITS JURISDICTION, MAY DO OUTSIDE THE STATE.

INSOFAR AS THE PRESENT MATTER IS INVOLVED, IT APPEARS EACH BIDDER INDICATED A WILLINGNESS TO OBTAIN A STATE LICENSE IN THE EVENT IT WAS AWARDED A CONTRACT BUT, ON THE OTHER HAND, THE AUTHORITIES OF THE STATE OF NEW MEXICO INDICATED THEY WOULD REFUSE TO ISSUE A LICENSE ON THE THEORY THAT THE BIDDERS VIOLATED THE LAW BY FAILING TO OBTAIN A LICENSE PRIOR TO BIDDING. ANY ACTION ON THE PART OF THE STATE PREVENTING BIDDING ON GOVERNMENT CONTRACTS OR PREVENTING A CONTRACTOR FROM CARRYING OUT GOVERNMENT WORK WOULD BE IN DEROGATION OF THE GOVERNMENT'S RIGHT TO SELECT CONTRACTORS OF ITS OWN CHOOSING AND, UNDOUBTEDLY, WOULD TEND TO DISCOURAGE BIDDING AND RESTRICT THE FREE AND OPEN COMPETITION TO WHICH THE GOVERNMENT IS ENTITLED AND WHICH, UNDER FEDERAL STATUTES, IS REQUIRED IN CONNECTION WITH THE AWARD OF CONTRACTS FOR SERVICES AND SUPPLIES.

THE COURTS HAVE CONSISTENTLY HELD THAT THE POLICE AND TAXING POWERS OF A STATE CANNOT RIGHTFULLY BE SO EXERCISED AS TO IMPEDE, OBSTRUCT, BURDEN, OR INTERFERE WITH THE EXECUTION OF NATIONAL POWERS. MCCULLOCH V. MARYLAND, 4 WHEAT. 316; WESTON V. CHARLESTON, 2 PET. 449; THOMSON V. PACIFIC RAILROAD, 9 WALL. 579; FARMERS BANK V. MINNESOTA, 232 U.S. 516. ALSO, SEE PANHANDLE OIL CO. V. KNOX, 277 U.S. 218, DEAL WITH A STATE TAXING STATUTE, WHEREIN THE COURT STATED:

* * * THE RIGHT OF THE UNITED STATES TO MAKE SUCH PURCHASES IS DERIVED FROM THE CONSTITUTION. THE PETITIONER'S RIGHT TO MAKE SALES TO THE UNITED STATES WAS NOT GIVEN BY THE STATE AND DOES NOT DEPEND ON STATE LAWS; IT RESULTS FROM THE AUTHORITY OF THE NATIONAL GOVERNMENT UNDER THE CONSTITUTION TO CHOOSE ITS OWN MEANS AND SOURCES OF SUPPLY. WHILE MISSISSIPPI MAY IMPOSE CHARGES UPON PETITIONER FOR THE PRIVILEGE OF CARRYING ON TRADE THAT IS SUBJECT TO THE POWER OF THE STATE, IT MAY NOT LAY ANY TAX UPON TRANSACTIONS BY WHICH THE UNITED STATES SECURES THE THINGS DESIRED FOR ITS GOVERNMENTAL PURPOSES.

ALSO, IT HAS BEEN HELD THAT A STATE MAY NOT LAWFULLY SUBJECT TO AN OCCUPATION OR PRIVILEGE TAX THE MEANS WHICH THE FEDERAL GOVERNMENT ADOPTS OR EMPLOYS IN THE EXECUTION OF ITS FUNCTIONS. CHOCTAW AND GULF RAILROAD V. HARRISON, 235 U.S. 292; WILLIAMS V. TALLADEGA, 226 U.S. 404; RAILROAD CO. V. PENISTON, 18 WALL. 5, 36; AND JAYBIRD MINING CO. V. WEIR, 271 U.S. 609. AND SEE OSBORN V. BANK OF THE UNITED STATES, 9 WHEAT. 738, 866, HOLDING A STATE LAW INVALID, AS APPLIED TO THE BANK OF THE UNITED STATES, WHICH PROVIDED FOR A TAX WITH RESPECT TO THE TRANSACTING OF "BANKING BUSINESS IN THE STATE, WITHOUT BEING ALLOWED TO DO SO BY THE LAWS THEREOF," WHEREIN THE COURT COMPARED THE BANK TO A PRIVATE CONTRACTOR AND STATED:

IT WILL NOT BE CONTENDED THAT THE DIRECTORS OR OTHER OFFICERS OF THE BANK ARE OFFICERS OF THE GOVERNMENT. BUT IT IS CONTENDED THAT, WERE THEIR RESEMBLANCE TO CONTRACTORS MORE PERFECT THAN IT IS, THE RIGHT OF THE STATE TO CONTROL ITS OPERATIONS, IF THOSE OPERATIONS BE NECESSARY TO ITS CHARACTER, AS A MACHINE EMPLOYED BY THE GOVERNMENT, CANNOT BE MAINTAINED. CAN A CONTRACTOR FOR SUPPLYING A MILITARY POST WITH PROVISIONS BE RESTRAINED FROM MAKING PURCHASES WITHIN ANY STATE OR FROM TRANSPORTING THE PROVISIONS TO THE PLACE AT WHICH THE TROOPS WERE STATIONED? OR COULD HE BE FINED OR TAXED FOR DOING SO? WE HAVE NOT YET HEARD THESE QUESTIONS ANSWERED IN THE AFFIRMATIVE. IT IS TRUE THAT THE PROPERTY OF THE CONTRACTOR MAY BE TAXED AS THE PROPERTY OF OTHER CITIZENS; AND SO MAY THE LOCAL PROPERTY OF THE BANK. BUT WE DO NOT ADMIT THAT THE ACT OF PURCHASING, OR OF CONVEYING THE ARTICLES PURCHASED, CAN BE UNDER STATE CONTROL.

YOUR SUBMISSION DOES NOT INDICATE WHETHER THE LAND ON WHICH THE WORK HERE INVOLVED IS TO BE PERFORMED, THE JICARILLA INDIAN AGENCY, DULCE, N.MEX., IS UNDER THE EXCLUSIVE JURISDICTION OF THE FEDERAL GOVERNMENT, OR WHETHER THE STATE HAS CONCURRENT JURISDICTION WITH THE UNITED STATES. IT HAS BEEN HELD THAT WHERE THE STATE HAS CONCURRENT JURISDICTION OVER THE LAND ON WHICH THE WORK IS BEING PERFORMED IT MAY TAX THE PROPERTY AND INCOME OF A GOVERNMENT CONTRACTOR, AS DISTINGUISHED FROM THE RIGHT TO WORK IN THE STATE UNDER CONTRACT WITH THE GOVERNMENT, BUT THAT IT DOES NOT HAVE EVEN THIS RIGHT WHERE THE UNITED STATES HAS EXCLUSIVE JURISDICTION OVER SUCH LAND. MASON CO. V. TAX COMMISSION, 302 U.S. 186; JAMES V. DRAVO CONTRACTING CO., 302 U.S. 134; SURPLUS TRADING CO. V. COOK, 281 U.S. 647; FORT LEAVENWORTH RAILROAD CO. V. LOWE, 114 U.S. 525; AND OKLAHOMA CITY V. SANDERS, 94 F./2D) 323.

IN VIEW OF THE DECISIONS OF THE COURTS REFERRED TO ABOVE, AND OTHERS WHICH MIGHT BE CITED, THERE WOULD SEEM TO BE SERIOUS DOUBT WHETHER THE NEW MEXICO LICENSING STATUTE MAY HAVE ANY APPLICATION TO GOVERNMENT CONTRACTORS. THAT THE STATE RECOGNIZES THE EXISTENCE OF SUCH DOUBT IS EVIDENCED BY THE FACT THAT ITS OFFICIALS COMMUNICATED WITH THE ATTORNEY GENERAL OF THE UNITED STATES CONCERNING THE MATTER. THE ATTORNEY GENERAL REPLIED UNDER DATE OF DECEMBER 8, 1939, AS FOLLOWS:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 4 AND TELEGRAM OF DECEMBER 7 REGARDING THE APPLICABILITY OF A NEW MEXICO STATUTE TO CONTRACTORS ENGAGED ON WORK FOR THE UNITED STATES.

IT WOULD PROBABLY BE NECESSARY FOR THIS DEPARTMENT, IF CALLED UPON BY THE INDIAN SERVICE, TO TAKE THE POSITION THAT THE STATUTE IS INAPPLICABLE, BUT, OF COURSE, THE MATTER COULD BE SETTLED ONLY BY A FINAL DECISION IN THE COURTS.

IF THE BUILDINGS ARE TO BE ERECTED UPON LAND OVER WHICH THE UNITED STATES HAS ACQUIRED EXCLUSIVE JURISDICTION, YOU WILL FIND AN INTERESTING DISCUSSION IN FORT LEAVENWORTH R.R. CO. V. LOWE, 114 U.S. 525-528. YOU ARE ALSO REFERRED TO THE FOLLOWING CASES: MCCULLOCH V. MARYLAND, 4 WHEAT. 316-425; FARMERS BANK V. MINNESOTA, 232 U.S. 516 526; CHOCTAW AND GULF R.R. V. HARRISON, 235 U.S. 292-298. IN THE LAST MENTIONED CASE THE COURT HELD THAT A RAILROAD COMPANY, OPERATING A COAL MINE ON INDIAN LAND UNDER CONTRACT WITH THE UNITED STATES, WAS AN INSTRUMENTALITY OF THE UNITED STATES AND COULD NOT BE SUBJECTED TO AN OCCUPATION OR PRIVILEGE TAX BY A STATE.

I ALSO CALL YOUR ATTENTION TO THE FACT THAT THE NEW MEXICO STATUTE IS BY ITS TERMS INAPPLICABLE TO "AN AUTHORIZED REPRESENTATIVE OR REPRESENTATIVES OF THE UNITED STATES GOVERNMENT"--- WHICH RAISES THE QUESTION WHETHER A CONTRACTOR DULY EMPLOYED BY THE UNITED STATES IS NOT SUCH AN AUTHORIZED REPRESENTATIVE.

IN ANY EVENT IT MAY BE SAID IN ANSWER TO YOUR FIRST QUESTION THAT, IF OTHERWISE PROPER, THE BID OF AN UNLICENSED CONTRACTOR MUST BE CONSIDERED WHEN SUBMITTED FOR CONSTRUCTION OF A GOVERNMENT PROJECT IN THE STATE OF NEW MEXICO. SEE IN THIS CONNECTION THE DECISIONS OF THIS OFFICE PUBLISHED AT 15 COMP. GEN. 425, AND 16 ID. 97, HOLDING THAT BIDDING FOR TRANSPORTING FEDERAL SUPPLIES COULD NOT BE RESTRICTED TO FIRMS OR INDIVIDUALS LICENSED BY A STATE OR QUOTING RATES PRESCRIBED BY STATE LAW.

HOWEVER, WHILE THE UNQUALIFIED BID OF AN UNLICENSED CONTRACTOR IS FOR CONSIDERATION AND ACCEPTANCE, IF OTHERWISE ACCEPTABLE, THERE WOULD BE NO AUTHORITY TO ACCEPT A BID CONDITIONED ON THE UNITED STATES DEFENDING ANY ACTION WHICH THE STATE MIGHT TAKE AGAINST AN UNLICENSED CONTRACTOR. WHILE THE CONTRACT PRICE, AS SUCH, MIGHT BE DEFINITE, ACCEPTING SUCH A BID MIGHT RESULT IN IMPOSING BY CONTRACT AN UNCERTAIN AND INDEFINITE LIABILITY UPON THE UNITED STATES. IN THAT RESPECT THE MATTER WOULD NOT BE UNLIKE THOSE CASES IN WHICH THIS OFFICE HAS HELD THAT BIDS SO QUALIFIED AS TO RENDER INDEFINITE THE CONTRACT PRICE TO BE PAID ARE FOR REJECTION FOR UNCERTAINTY. 19 COMP. GEN. 614. NO DUTY OR RESPONSIBILITY RESTS UPON THE UNITED STATES TO DEFEND ITS CONTRACTORS IN ACTIONS AGAINST THEM BY STATE OR LOCAL AUTHORITIES AND SUCH RESPONSIBILITY, UNCERTAIN AND INDEFINITE IN ITS SCOPE AND EFFECT, MAY NOT PROPERLY BE IMPOSED BY CONTRACT, IRRESPECTIVE OF WHAT ACTION THE GOVERNMENT MIGHT DIRECTLY TAKE, IN ITS OWN INTERESTS AND ON ITS OWN BEHALF, TO SECURE THE UNOBSTRUCTED AND ORDERLY PROSECUTION OF ITS BUSINESS. ACCORDINGLY YOUR SECOND QUESTION IS ANSWERED IN THE NEGATIVE.