B-9337, MAY 14, 1940, 19 COMP. GEN. 930

B-9337: May 14, 1940

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CONTRACTS - EXCHANGES - USED FOR RECONDITIONED MOTORS WHERE IT IS PROPOSED TO CONTRACT FOR REPLACEMENT OF UNSERVICEABLE MOTORS WITH RECONDITIONED MOTORS. THAT IN CASE OF EXCHANGE OF AN UNSERVICEABLE MOTOR FOR A RECONDITIONED ONE ONLY THE NET COST IS REQUIRED TO BE CHARGED TO THE APPLICABLE APPROPRIATION. IS FOR APPLICATION ONLY IF THE RECONDITIONED MOTOR IS FURNISHED AT A PRICE NOT EXCEEDING WHAT IT WOULD HAVE COST TO RECONDITION THE OLD MOTOR. 16 COMP. THE INVITATION FOR BIDS UPON WHICH THE CONTRACT WAS FOUNDED DID NOT SOLICIT CASH BIDS FOR THE TWO USED CYLINDER-BLOCK ASSEMBLIES WHICH WERE TRADED IN. FROM THIS OFFICE REQUESTING AN EXPLANATION OF THE FAILURE TO SOLICIT CASH BIDS AS WELL AS TRADE-IN ALLOWANCES ON THE OLD MOTORS THERE WAS RECEIVED A LETTER OF MARCH 15.

B-9337, MAY 14, 1940, 19 COMP. GEN. 930

CONTRACTS - EXCHANGES - USED FOR RECONDITIONED MOTORS WHERE IT IS PROPOSED TO CONTRACT FOR REPLACEMENT OF UNSERVICEABLE MOTORS WITH RECONDITIONED MOTORS, AS A SUBSTITUTE FOR RECONDITIONING, THERE SHOULD BE ADVERTISING FOR CASH BIDS AS WELL AS FOR TRADE-IN ALLOWANCES ON THE UNSERVICEABLE MOTORS AND ACCEPTANCE OF THE BID RESULTING IN THE LOWEST NET COST TO THE GOVERNMENT. 16 COMP. GEN. 782, AND ID. 1013, AMPLIFIED. THE RULE OF 16 COMP. GEN. 1013, THAT IN CASE OF EXCHANGE OF AN UNSERVICEABLE MOTOR FOR A RECONDITIONED ONE ONLY THE NET COST IS REQUIRED TO BE CHARGED TO THE APPLICABLE APPROPRIATION, IS FOR APPLICATION ONLY IF THE RECONDITIONED MOTOR IS FURNISHED AT A PRICE NOT EXCEEDING WHAT IT WOULD HAVE COST TO RECONDITION THE OLD MOTOR. 16 COMP. GEN. 1013, AMPLIFIED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, MAY 14, 1940:

THERE HAS BEEN BROUGHT TO MY ATTENTION CONTRACT NO. 1222P-CIV-545, ENTERED INTO NOVEMBER 10, 1939, WITH USED MAHER, INC., DALLAS, TEX., COVERING THE PURCHASE OF TWO RECONDITIONED CYLINDER BLOCK ASSEMBLIES FOR FORD V-8 PICK-UP TRUCKS AT $123.46 EACH, LESS TRADE-IN ALLOWANCE ON TWO OLD CYLINDER-BLOCK ASSEMBLIES AT $61 EACH.

THE INVITATION FOR BIDS UPON WHICH THE CONTRACT WAS FOUNDED DID NOT SOLICIT CASH BIDS FOR THE TWO USED CYLINDER-BLOCK ASSEMBLIES WHICH WERE TRADED IN. IN REPLY TO A LETTER OF JANUARY 31, 1940, FROM THIS OFFICE REQUESTING AN EXPLANATION OF THE FAILURE TO SOLICIT CASH BIDS AS WELL AS TRADE-IN ALLOWANCES ON THE OLD MOTORS THERE WAS RECEIVED A LETTER OF MARCH 15, 1940, FROM THE CHIEF COUNSEL, NATIONAL PARK SERVICE, DEPARTMENT OF THE INTERIOR, FORWARDING A COPY OF A MEMORANDUM DATED FEBRUARY 5, 1940, FROM THE PURCHASING AND CONTRACTING OFFICER, DALLAS, TEX., IN PERTINENT PART AS FOLLOWS:

SEPARATE CASH BIDS FOR THE OUTRIGHT SALE OF THE OLD ASSEMBLIES WERE NOT REQUESTED IN LINE WITH INSTRUCTIONS CONTAINED IN THE HANDBOOK, CHAPTER III, DIVISION B, SECTION 1, SHEET 4, WHICH, IN PART, IS AS FOLLOWS:

"* PURCHASE OF RECONDITIONED ENGINES OR PARTS FOR MOTOR VEHICLES.--

"WHERE A USED MOTOR IS REPLACED BY A RECONDITIONED MOTOR AS A SUBSTITUTE FOR RECONDITIONING THE USED MOTOR, ONLY THE NET COST OF SUCH EXCHANGE OR SUBSTITUTION NEED BE CHARGED TO THE AVAILABLE APPROPRIATION. THE PROCEDURE DOES NOT APPLY AGAINST THE PROCUREMENT OF NEW MOTORS, BUT IS RESTRICTED TO THOSE CASES WHERE A RECONDITIONED USED MOTOR IS PROCURED AS A DIRECT SUBSTITUTE FOR A LIKE USED MOTOR IN NEED OF RECONDITIONING.

"UNDER THE FOREGOING CONDITIONS IT WILL NOT BE NECESSARY TO ADVERTISE SEPARATELY FOR BIDS ON THE SALE OF THE OLD ENGINE, AS ONLY THE NET COST OF THE SUBSTITUTION WILL BE DEBITED TO THE APPROPRIATE ALLOTMENT LEDGER.'

THE FIRST PARAGRAPH OF THE INSTRUCTIONS QUOTED ABOVE IS IN SUBSTANTIAL ACCORD WITH THE DECISION OF THIS OFFICE, 16 COMP. GEN. 1013, TO THE SECRETARY OF THE TREASURY, BUT THE BASIS FOR THE SECOND PARAGRAPH OF SAID INSTRUCTIONS IS NOT APPARENT. IT HAS BEEN HELD CONSISTENTLY BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT THAT IN DISPOSING OF USED PROPERTY OF THE UNITED STATES IN CONNECTION WITH THE PURCHASE OF REPLACEMENT EQUIPMENT, CASH BIDS AS WELL AS TRADE-IN ALLOWANCES SHOULD BE SOLICITED AND THAT THAT OFFER SHOULD BE ACCEPTED WHICH WILL RESULT IN THE LOWEST NET COST TO THE GOVERNMENT. SEE 18 COMP. GEN. 227 AND EARLIER DECISIONS CITED IN THE SUBMISSION IN THAT CASE; ALSO, SEE 19 COMP. GEN. 313.

IT IS TRUE THAT IN A DECISION OF FEBRUARY 20, 1937, 16 COMP. GEN. 782, TO YOU, WHICH HAD REFERENCE TO, AND IN SOME MEASURE MODIFIED, A RULE OF PROCEDURE STATED IN AN EARLIER DECISION (16 COMP. GEN. 351) TO YOU, IT WAS STATED THAT FOR REASONS THEREIN ASSIGNED THERE WAS NO REQUIREMENT FOR FURTHER ADVERTISING IN THAT INSTANCE TO DETERMINE THE TRADE-IN VALUE OF OLD MOTORS TO BE EXCHANGED FOR RECONDITIONED MOTORS. BUT THAT DECISION DEALT WITH FACTS AND CONDITIONS EXISTING IN CONNECTION WITH A PARTICULAR TREASURY DEPARTMENT, PROCUREMENT DIVISION, CONTRACT WHICH HAD BEEN LET TO THE FORD MOTOR CO. AFTER DUE ADVERTISEMENT, THE CONCLUSION APPEARING JUSTIFIED THAT THE TRADE-IN ALLOWANCES AVAILABLE UNDER THAT CONTRACT FOR UNSERVICEABLE FORD MOTORS IN SUCH TRANSACTIONS WERE HIGHER THAN WOULD OTHERWISE BE BID FOR SUCH OLD MOTORS. THE DECISION WAS NOT INTENDED FOR GENERAL APPLICATION IN ALL INSTANCES IN WHICH IT IS PROPOSED TO REPLACE UNSERVICEABLE MOTORS AND PARTS WITH RECONDITIONED ENGINES, ETC. THE PROPER PROCEDURE WHEN A CONTRACT IS TO BE ENTERED INTO IN SUCH A CASE IS TO ADVERTISE FOR CASH BIDS AS WELL AS FOR TRADE-IN ALLOWANCES ON THE UNSERVICEABLE EQUIPMENT; AND IN THE EVENT THAT CASH OFFERS RECEIVED EXCEED THE TRADE-IN ALLOWANCES IN ANY INSTANCE THE BEST CASH OFFER FOR THE OLD ENGINES WOULD BE FOR ACCEPTANCE. IT MAY BE CONCEDED THAT IN MOST INSTANCES WHERE THE HIGHEST CASH OFFER WOULD EXCEED THE TRADE-IN OFFER AND IT WOULD APPEAR THAT THE ONLY WAY DEFINITELY TO DETERMINE THAT FACT WOULD BE BY PROPERLY ADVERTISING ON THE BASIS OF SOLICITATION FOR BOTH CASH BIDS AND TRADE-IN ALLOWANCES, 7 COMP. GEN. 685.

IN A DECISION OF MAY 19, 1937, 16 COMP. GEN. 1013, TO THE SECRETARY OF THE TREASURY, MENTIONED ABOVE, IT WAS CONCLUDED THAT WHERE A USED MOTOR WAS REPLACED BY A RECONDITIONED MOTOR AS A SUBSTITUTE FOR RECONDITIONING THE USED MOTOR, ONLY THE NET COST OF SUCH EXCHANGE OR SUBSTITUTION WAS REQUIRED TO BE CHARGED TO THE APPLICABLE APPROPRIATION. THAT DECISION, ALSO, HAD REFERENCE TO THE ABOVE MENTIONED GENERAL SUPPLY CONTRACT WITH THE FORD MOTOR CO. AND PRESUPPOSED THE EXISTENCE OF A CONTRACT ENTERED INTO AFTER PROPER ADVERTISING IN ACCORDANCE WITH ESTABLISHED RULES GOVERNING THE LETTING OF CONTRACTS FOR THE UNITED STATES, AND A DEFINITE SHOWING THAT TRADE IN ALLOWANCES FOR THE USED EQUIPMENT EITHER EQUALED OR EXCEEDED CASH OFFERS RECEIVED FOR SUCH USED EQUIPMENT AS COMPARED WITH THE PRICES OFFERED ON THE RECONDITIONED MOTORS FOR INSTALLATION. NOTHING SAID IN THAT DECISION WOULD APPEAR TO JUSTIFY A CONCLUSION THAT ADVERTISING FOR CASH BIDS AS WELL AS TRADE-IN ALLOWANCES ON THE OLD MOTORS PROPERLY MAY BE DISPENSED WITH IN THE INCEPTION OF SUCH A CONTRACT, 7 COMP. GEN. 230; ALSO, SEE 15 COMP. GEN. 811, IN WHICH THERE WAS APPROVED A PROCEDURE PROPOSED BY THE NATIONAL PARK SERVICE FOR USE IN PROCURING RECONDITIONED ENGINES ON THE BASIS OF SOLICITING CASH BIDS AS WELL AS TRADE-IN ALLOWANCES ON THE OLD ENGINES. NEITHER THE DECISION IN 16 COMP. GEN. 782 NOR THAT IN 16 ID. 1013 WAS INTENDED TO MODIFY THAT DECISION EXCEPT INSOFAR AS THE PARTICULAR CONTRACT CONSIDERED IN THOSE TWO DECISIONS WAS CONCERNED AND AS TO THE CHARGE AGAINST APPLICABLE APPROPRIATIONS IN SUCH CASES.

HOWEVER, IT APPEARS THAT SOME CONFUSION HAS ARISEN IN YOUR DEPARTMENT AS TO THE PROPER SCOPE AND INTERPRETATION OF THE TWO LATER DECISIONS AND THAT THE INSTRUCTION IN QUESTION WAS ISSUED UNDER A MISAPPREHENSION OF WHAT WAS HELD IN 16 COMP. GEN. 782, RELATIVE TO FURTHER SOLICITATION OF CASH BIDS UNDER THE CONTRACT WITH THE FORD MOTOR CO. ALSO, THE CONCLUSION REACHED IN 16 COMP. GEN. 1013 IS FOR APPLICATION ONLY IN CASES WHERE THE RECONDITIONED MOTOR IS FURNISHED AT A PRICE WHICH IS THE SAME AS OR LESS THAN WHAT IT WOULD COST TO HAVE THE OLD MOTOR RECONDITIONED IN ANY EVENT. THE CONTRACT HERE IN QUESTION INCLUDES NO SHOWING TO THAT EFFECT SINCE THE INVITATION MERELY REQUESTED PRICES ON TWO RECONDITIONED CYLINDER-BLOCK ASSEMBLIES AND A STATEMENT AS TO WHAT ALLOWANCE WOULD BE MADE AS A TRADE- IN ON TWO OLD CYLINDER-BLOCK ASSEMBLIES, AND THE BID WAS SUBMITTED ACCORDINGLY.

WHILE THE SUBJECT AND SIMILAR CONTRACTS HERETOFORE ENTERED INTO FOR THE REPLACEMENT OF USED MOTORS WITH RECONDITIONED MOTORS WILL NOT BE QUESTIONED FURTHER SOLELY BY REASON OF FAILURE TO SOLICIT CASH BIDS ON THE USED ENGINES REPLACED, IMMEDIATE ADMINISTRATIVE MEASURES SHOULD BE TAKEN TO PRECLUDE ENTERING INTO ANY SUCH CONTRACTS IN THE FUTURE WITHOUT SOLICITING CASH BIDS AS WELL AS TRADE-IN ALLOWANCES ON THE USED ENGINES TO BE REPLACED. THE QUOTED INSTRUCTIONS TO PURCHASING AND CONTRACTING OFFICERS SHOULD BE AMENDED ACCORDINGLY.