A-84283, OCTOBER 8, 1937, 17 COMP. GEN. 317

A-84283, OCTOBER 8, 1937, 17 COMP. GEN. 317

CONTRACTS - FEDERAL MILK, ETC., AGREEMENTS, LICENSES AND ORDERS - SPECIFICATION COMPLIANCE STIPULATION AND APPLICABILITY DETERMINATION IN VIEW OF THE REPORTED CONSTANT DEVELOPMENT AND EXTENSION OF MARKETING AGREEMENTS, LICENSES, AND ORDERS APPROVED AND ISSUED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, BOTH AS TO PRODUCTS AND REGIONS AFFECTED, ALL SPECIFICATIONS FOR SUPPLIES AS TO WHICH THERE ARE IN EFFECT ANY SUCH MARKETING AGREEMENTS, ETC., SHOULD CONTAIN THE APPROVED COMPLIANCE STIPULATIONS, BUT, IF ON THE DAY OF OPENING OF BIDS, THERE IS NO SUCH AGREEMENT, LICENSE, OR ORDER APPLICABLE TO THE SUPPLIES INVOLVED, A BIDDER'S DELETION OF THE COMPLIANCE STIPULATION WOULD NOT REQUIRE DISREGARDING THE BID IN MAKING AWARD. COMP. GEN. 824, AMPLIFIED. THE CONTROLLING CONSIDERATION IN DETERMINING WHETHER ANY MARKETING AGREEMENT, LICENSE, OR ORDER, APPROVED AND ISSUED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, IS IN EFFECT IN A SPECIFIED AREA IN CONNECTION WITH THE CONTRACTING FOR FEDERAL SUPPLIES AND THE REQUIREMENT OF COMPLIANCE THEREWITH, IS THE STATUS OF THE BIDDER AND HIS SUPPLIER RATHER THAN THE LOCATION OF THE DELIVERY POINT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, OCTOBER 8, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF SEPTEMBER 2, 1937, AS FOLLOWS:

REFERENCE IS MADE TO YOUR DECISION ADDRESSED TO THE SECRETARY OF THE TREASURY ON MARCH 6, 1937 (A-84283), WHICH MODIFIES PREVIOUS PURCHASING PRACTICE BY PERMITTING A FEDERAL PURCHASING AGENCY TO ACCEPT LOW BIDS FROM BIDDERS WHO HAVE STRICKEN OUT THE COMPLIANCE CLAUSE, IF NO MARKETING AGREEMENT, LICENSE, OR ORDER ISSUED BY THE SECRETARY OF AGRICULTURE IS IN EFFECT IN THE AREA WHERE THE PURCHASE IS BEING MADE AND APPLICABLE TO ANY OF THE ITEMS INVOLVED. PRIOR TO THIS OPINION, THE COMPLIANCE CLAUSE WAS REGARDED AS ANY OTHER SPECIFICATION, DELETION OR MODIFICATION OF WHICH MADE THE BID SUBJECT TO REJECTION AS NOT BEING IN RESPONSE TO THE INVITATION.

AS A RESULT OF THIS OPINION, THIS DEPARTMENT HAS RECEIVED NUMEROUS INQUIRIES FROM OTHER GOVERNMENT AGENCIES AS TO WHETHER A MARKETING AGREEMENT, LICENSE, OR ORDER IS IN EFFECT IN SOME SPECIFIED CITY OR AREA. IT HAS APPARENTLY BEEN ASSUMED THAT IF ANY OF THE ABOVE REGULATIONS ARE NOT LISTED AS APPLICABLE TO THE SPECIFIED AREA THAT IT IS NOT NECESSARY, UNDER THE RULING CONTAINED IN THE ABOVE REFERRED TO OPINION, TO INCLUDE THE COMPLIANCE CLAUSE IN INVITATIONS TO BID AND CONTRACTS FOR DAIRY PRODUCTS PURCHASED EITHER IN OR FOR USE IN SUCH AREAS.

WHILE THE CONDITIONS FOR PERMITTED DELETION OF THE COMPLIANCE CLAUSE, AS SET FORTH IN THIS OPINION, APPEAR TO BE REASONABLE, THEY WILL, IN EFFECT, MAKE THE ADMINISTRATION OF THE COMPLIANCE CLAUSE SO DIFFICULT AS TO SERIOUSLY IMPAIR ITS EFFECTIVENESS IN SECURING THE ADMINISTRATIVE HARMONY BETWEEN REGULATORY AND PURCHASING OPERATIONS OF THE GOVERNMENT WHICH IT WAS DESIGNED TO ACHIEVE AND FOR THE FOLLOWING REASONS:

1.TWO MARKETING AGREEMENTS (FOR THE EVAPORATED AND DRY SKIM MILK INDUSTRY) AND ONE LICENSE (FOR THE EVAPORATED MILK INDUSTRY) ARE NOT REGIONAL BUT APPLY TO THE ENTIRE UNITED STATES. MARKETING AGREEMENTS, LICENSES, AND ORDERS RELATIVE TO THE HANDLING OF FLUID MILK AND CREAM ARE REGIONAL IN THEIR APPLICATION AND ARE CONSTANTLY BEING DEVELOPED FOR ADDITIONAL AREAS OR MODIFIED AND SOMETIMES SUSPENDED OR TERMINATED. ALSO AUTHORITY TO DEVELOP SIMILAR REGULATION UNDER THE AGRICULTURAL MARKETING AGREEMENT ACT OF 1937 IS APPLICABLE TO OTHER DAIRY PRODUCTS AND MAY BE EXPANDED ACCORDING TO THE NEEDS AND DESIRES OF THE DAIRY INDUSTRY. WOULD BE CONFUSING AND ADMINISTRATIVELY DIFFICULT TO KEEP ALL GOVERNMENT AGENCIES PURCHASING DAIRY PRODUCTS INFORMED OF EACH CHANGE SO THAT INSERTION OR DELETION OF THE COMPLIANCE CLAUSE MIGHT BE MADE IF IT WERE OTHERWISE FEASIBLE. CONSEQUENTLY, THE USE OF THE COMPLIANCE CLAUSE WAS REQUIRED IN ALL CONTRACTS FOR THE PURCHASE OF DAIRY PRODUCTS AS LISTED IN CIRCULAR LETTER NO. 133 ISSUED BY THE DIRECTOR OF PROCUREMENT ON DECEMBER 17, 1935, IN ORDER THAT THIS PURCHASING REQUIREMENT COULD EFFECTIVELY PARALLEL THE REGULATORY FUNCTIONS OF THE GOVERNMENT WITH RESPECT TO THESE SAME COMMODITIES.

2. LOCATION OF THE GOVERNMENT AGENCY PURCHASING OR USING DAIRY PRODUCTS OUTSIDE OF THE ,MARKETING AREA" AS THAT TERM IS DEFINED IN THE VARIOUS AGREEMENTS, LICENSES, OR ORDERS, IS NOT INDICATIVE OF WHETHER OR NOT THE COMMODITY TO BE FURNISHED UNDER THE CONTRACT, OR THE BIDDER, IS OR IS NOT SUBJECT TO ONE OR MORE OF THE ABOVE ENUMERATED REGULATIONS. FOR INSTANCE, THE VETERANS' ADMINISTRATION FACILITY AT BEDFORD, MASS., IS NOT LOCATED IN THE GREATER BOSTON MARKETING AREA BUT IS SO NEAR TO IT THAT PROBABLY MOST OF THE BIDDERS ON THAT CONTRACT ARE HANDLERS SUBJECT TO THE BOSTON ORDER, AND THE MILK FURNISHED TO THE FACILITY IS THAT PURCHASED FROM PRODUCERS, AS THE TERM "PRODUCER" IS DEFINED IN THE ORDER, AND HENCE IS TO BE PAID FOR BY THE HANDLER (BIDDER) ACCORDING TO THE TERMS OF THE ORDER. THE SAME MIGHT BE EQUALLY TRUE OF A FACILITY LOCATED IN EITHER OF THE STATES OF NEW HAMPSHIRE OR VERMONT, ALTHOUGH NO AGREEMENT OR ORDER IS APPLICABLE TO A MARKETING AREA IN EITHER OF THOSE STATES. NOR DOES THE HANDLER HIMSELF HAVE TO BE LOCATED IN A MARKETING AREA TO BE SUBJECT TO AN ORDER. THE ESSENTIAL CONDITION IS THAT THE HANDLER SELL MILK OR HANDLE MILK FOR SALE AS MILK IN THE DEFINED MARKETING AREA, WHEREUPON HE IS OBLIGATED TO PAY NOT LESS THAN THE MINIMUM PRICES FOR ALL MILK WHICH HE BUYS FROM "PRODUCERS," AS THE TERM IS DEFINED, IRRESPECTIVE OF WHETHER ALL THE MILK SO PURCHASED ACTUALLY REACHES THE MARKETING AREA.

THERE WOULD BE NO WAY TO DETERMINE, FROM THE LOCATION OF THE PURCHASING AGENCY, WHETHER THE BIDDERS OR THE COMMODITY INTENDED TO BE FURNISHED IS SUBJECT TO THE TERMS OF ONE OF THE ENUMERATED REGULATIONS, AND HENCE WHETHER THE COMPLIANCE CLAUSE MIGHT BE OMITTED FROM THE INVITATION WITHOUT DEFEATING ITS PURPOSE.

3. TWO EXISTING MARKETING AGREEMENTS AND ONE LICENSE, ALL OF WHICH MAY SHORTLY BE CHANGED TO AN ORDER BASIS, ARE NATION-WIDE, I.E., THEY ARE APPLICABLE TO ALL MANUFACTURERS OF THE SPECIFIED DAIRY PRODUCTS IN THE UNITED STATES. TO ELIMINATE THE COMPLIANCE CLAUSE AS TO OTHER DAIRY PRODUCTS FURNISHED BY UNREGULATED HANDLERS WHENEVER ANY REGULATED DAIRY PRODUCTS ARE TO BE PURCHASED WOULD NECESSITATE THEIR BEING PURCHASED UNDER SEPARATE INVITATION. THIS WOULD COMPLICATE THE PRESENT PURCHASE PROCEDURE.

4. TO ASCERTAIN DEFINITELY BEFORE INVITATIONS ARE ISSUED WHETHER THE COMMODITY TO BE FURNISHED, PARTICULARLY IN THE CASE OF FLUID MILK, IS AFFECTED BY ANY SUCH REGULATION BY VIRTUE OF THE FACT THAT THE HANDLING AND THE HANDLER IS UNDER A REGULATION, WOULD BE IMPOSSIBLE UNLESS THE NAMES OF ALL BIDDERS WERE KNOWN IN ADVANCE AND EXAMINATION MADE OF THEIR OPERATIONS. SUCH DETAILED INFORMATION IS NOT NOW AVAILABLE IN WASHINGTON AND COULD BE SECURED ONLY WITH MUCH DIFFICULTY AND DELAY.

5. THE ONLY PRACTICAL WAY TO MAKE THE COMPLIANCE CLAUSE APPLICABLE TO ALL TRANSACTIONS WHICH IT IS INTENDED TO REACH, IS TO HAVE IT APPEAR UNIFORMLY IN ALL BIDS AND CONTRACTS FOR THE PURCHASE OF DAIRY PRODUCTS LISTED IN CIRCULAR LETTER NO. 133 ISSUED BY THE DIRECTOR OF PROCUREMENT ON DECEMBER 17, 1935. THE COMPLIANCE CLAUSE DOES NOT MAKE ANY ONE SUBJECT TO A MARKETING AGREEMENT, LICENSE, OR ORDER, WHO IS NOT ALREADY SUBJECT THERETO UNDER THE TERMS OF SUCH REGULATIONS, EXCEPT, WHERE ONLY AN AGREEMENT IS IN EFFECT, THE EFFECT OF THE COMPLIANCE CLAUSE WOULD BE, FOR THE PURPOSE OF SECURING A GOVERNMENT CONTRACT, TO REQUIRE THE BIDDER AND CONTRACTOR TO COMPLY WITH THE TERMS OF THE AGREEMENT EVEN THOUGH THEY DID NOT SIGN IT. THERE IS NO POSSIBILITY OF ANY ONE'S BEING IN THIS CATEGORY AND NOT KNOWING IT, FOR ALL MEMBERS OF THE RESPECTIVE INDUSTRIES HAVE BEEN GIVEN AN OPPORTUNITY TO SIGN. IF, ON THE OTHER HAND, A BIDDER OF EVAPORATED MILK WERE NOT A MANUFACTURER, AND HENCE NOT A POSSIBLE PARTY TO THE EVAPORATED MILK AGREEMENT OR SUBJECT TO THE LICENSE WHICH APPLIES ONLY TO MANUFACTURERS, IT WOULD BE HIS OBLIGATION TO HAVE HIS SUPPLIER SIGN HIS CERTIFICATE OF COMPLIANCE. THE SUPPLIER WOULD BE PRESUMED TO BE A MANUFACTURER. IF SUCH A CERTIFICATE WERE NOT REQUIRED OF THE SUPPLIER IT WOULD BE EASY FOR THE MANUFACTURER TO CIRCUMVENT THE COMPLIANCE CLAUSE MERELY BY SELLING TO THE GOVERNMENT THROUGH A JOBBER RATHER THAN DIRECTLY. ANY BIDDER WHO IS IN DOUBT CAN QUICKLY ASCERTAIN HIS STATUS BY COMMUNICATING WITH THE SECRETARY OF AGRICULTURE, BUT IT IS QUITE A DIFFERENT ADMINISTRATIVE PROBLEM TO SET UP FACILITIES IN WASHINGTON TO KEEP DETAILED INFORMATION ON ALL INDIVIDUALS SUBJECT TO THE ENUMERATED REGULATIONS, AND IT WOULD BE IMPOSSIBLE FOR US TO KNOW WHO WOULD BE POTENTIAL SUPPLIERS OF CERTAIN JOBBERS WHO MIGHT SUBMIT BIDS ON GOVERNMENT CONTRACTS.

THERE WOULD SEEM TO BE NO VALID REASON FOR OBJECTING TO THE COMPLIANCE CLAUSE UNLESS THE BIDDER HOPED TO EVADE SOME LAWFUL REQUIREMENT. A FIRM AND UNIFORM POLICY FOLLOWED BY ALL GOVERNMENT PURCHASING AGENCIES IN THE PURCHASE OF DAIRY PRODUCTS WOULD PUT A STOP TO THE CONSTANT ATTEMPTS BY SOME BIDDERS TO EVADE POSSIBLE OBLIGATIONS BY STRIKING OUT THE COMPLIANCE CLAUSE, AND THUS CREATING NOT ONLY A LACK OF UNIFORMITY BUT ALSO AN EXCEEDINGLY DIFFICULT ADMINISTRATIVE PROBLEM.

IT IS REQUESTED THAT YOU REVIEW THE OPINION REFERRED TO ABOVE IN THE LIGHT OF THE FACTS HEREIN SET FORTH. IF YOU SO DESIRE, REPRESENTATIVES OF THE DAIRY SECTION, AGRICULTURAL ADJUSTMENT ADMINISTRATION, WILL BE GLAD TO CONFER WITH YOU.

THE DECISION TO WHICH YOU REFER, 16 COMP. GEN. 824, WAS TO THE EFFECT THAT WHERE, AT THE DATE BIDS ARE OPENED, THERE ARE NOT IN EFFECT ANY MARKETING AGREEMENTS, LICENSES, OR ORDERS, APPROVED, EXECUTED, AND ISSUED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, APPLICABLE TO THE ITEMS SPECIFIED IN THE INVITATION FOR BIDS, AND TO WHICH THE BIDDER IS SUBJECT, THERE IS NO OBLIGATION OF COMPLIANCE TO BE ASSUMED BY A BIDDER, THE COMPLIANCE STIPULATION GENERALLY INCLUDED IN INVITATIONS FOR BIDS ON AGRICULTURAL COMMODITY PRODUCTS IS INOPERATIVE, AND HENCE ITS DELETION BY BIDDER IS IMMATERIAL AND DOES NOT REQUIRE OR JUSTIFY THE REJECTION OF AN OTHERWISE ACCEPTABLE LOW BID. THERE WAS NO SUGGESTION IN THE DECISION THAT THE COMPLIANCE CLAUSE SHOULD BE ELIMINATED FROM ANY INVITATION FOR BIDS, ALTHOUGH IT HAS BEEN POINTED OUT IN A PREVIOUS DECISION THAT ITS INCLUSION IS MORE IN THE NATURE OF ADMINISTRATIVE COMITY IN ORDER TO FACILITATE THE ADMINISTRATION OF THE AGRICULTURAL ADJUSTMENT ACT THAN A REQUIREMENT OF LAW, OR HAVING ANY POSITIVE WARRANT OF LAW FOR ITS USE, A-67056, MAY 20, 1936. THERE WOULD APPEAR NO REASON (OTHER THAN THE DOUBTFUL PROPRIETY OF ITS USE IN ANY CASE) WHY THE COMPLIANCE STIPULATION SHOULD BE OMITTED FROM INVITATIONS FOR BIDS COVERING, IN WHOLE OR IN PART, AGRICULTURAL PRODUCTS TO WHICH THERE IS IN EFFECT ANYWHERE AN APPLICABLE MARKETING AGREEMENT, LICENSE, OR ORDER DULY APPROVED, EXECUTED, OR ISSUED BY THE SECRETARY OF AGRICULTURE PURSUANT TO THE AUTHORITY OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED.

IT HERETOFORE HAS BEEN HELD THAT THERE WAS NO AUTHORITY FOR REQUIRING AN UNDERTAKING BY A BIDDER TO COMPLY WITH MARKETING AGREEMENTS, LICENSES, OR ORDERS WHICH MIGHT BE APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE AND BECOME EFFECTIVE SUBSEQUENT TO THE DATE OF OPENING OF BIDS. 15 COMP. GEN. 344. THE MOST THAT COULD BE REQUIRED OF A BIDDER IN THIS RESPECT IS AN UNDERTAKING TO COMPLY WITH MARKETING AGREEMENTS, ORDERS, OR LICENSES IN FORCE AT THE DATE OF OPENING OF BIDS AND APPLICABLE TO ANY OF THE COMMODITIES LISTED IN THE PROPOSAL.

CIRCULAR LETTER NO. 133, DECEMBER 19, 1935, OF THE PROCUREMENT DIVISION, WAS ISSUED PURSUANT TO DECISION OF NOVEMBER 13, 1935, TO YOU (15 COMP. GEN. 401), AND PROVIDED FOR INCLUDING IN INVITATIONS FOR BIDS AND IN CONTRACTS THE COMPLIANCE STIPULATIONS SUGGESTED IN THAT DECISION. DECISION OF MAY 20, 1936, A-67056, TO YOU, THIS OFFICE APPROVED CERTAIN MODIFICATIONS IN THOSE STIPULATIONS TO MEET ADMINISTRATIVE DIFFICULTIES WITH WHICH YOU WERE FACED AT THAT TIME.

THE PROPER PROCEDURE WOULD APPEAR TO BE TO INCLUDE APPROVED COMPLIANCE STIPULATIONS IN ALL INVITATIONS FOR BIDS COVERING COMMODITIES TO WHICH MARKETING AGREEMENTS, LICENSES, OR ORDERS ARE APPLICABLE. THEN IF BIDS ARE SUBMITTED ON SUPPLIES TO WHICH, ON THE DAY OF OPENING BIDS, THERE IS NO APPLICABLE MARKETING AGREEMENT, LICENSE, OR ORDER IN EFFECT, DELETION OF THE STIPULATION SHOULD BE DISREGARDED, AS HELD IN THE DECISION OF MARCH 6, 1937. IF BIDS ARE SUBMITTED ON SUPPLIES TO WHICH THERE IS AN APPLICABLE MARKETING AGREEMENT, LICENSE, OR ORDER, DELETION OF THE STIPULATION WOULD BE FOR CONSIDERATION IN MAKING THE AWARD.

WITH REFERENCE TO NUMBERED PARAGRAPH 2 OF YOUR LETTER, THE CONTROLLING CONSIDERATION IS WHETHER THERE IS AN EXISTING MARKETING AGREEMENT, LICENSE, OR ORDER TO WHICH THE BIDDER OR HIS SUBCONTRACTOR- - SUPPLIER--- IS AMENABLE, IRRESPECTIVE OF THE LOCATION OF THE GOVERNMENT FACILITY TO WHICH DELIVERIES ARE TO BE MADE, WHETHER WITHIN OR WITHOUT THE MARKETING AREA IN WHICH SUCH AGREEMENT, LICENSE, OR ORDER PREVAILS. THAT IS TO SAY, UNDER THE CONDITIONS OUTLINED IN SAID NUMBERED PARAGRAPH 2 AS TO THE VETERANS' ADMINISTRATION FACILITY AT BEDFORD, MASS., IF BIDDERS ARE HANDLERS SUBJECT TO THE GREATER BOSTON MARKETING AREA ORDER, THE COMPLIANCE STIPULATION, BOTH AS TO THE CONTRACTOR AND SUBCONTRACTOR, IF ANY, IS APPLICABLE. LIKEWISE, IN THE SUGGESTED CASES IN NEW HAMPSHIRE OR VERMONT, IF BIDS WERE RECEIVED FROM HANDLERS OR PRODUCERS WHO, OR WHOSE SUBCONTRACTORS, WERE LOCATED IN AN AREA WHERE A MARKETING AGREEMENT, LICENSE, OR ORDER WAS IN EFFECT, THE COMPLIANCE REQUIREMENT WOULD APPLY TO SUCH BIDDERS. ON THE OTHER HAND, IF BIDS WERE RECEIVED FROM HANDLERS OR PRODUCERS WHO, OR WHOSE SUBCONTRACTORS, WERE LOCATED IN AN AREA WHERE NO MARKETING AGREEMENT, LICENSE, OR ORDER WAS IN EFFECT TO WHICH THE BIDDER OR HIS SUPPLIER WAS SUBJECT, THE DELETION OF THE COMPLIANCE REQUIREMENT BY A BIDDER WOULD BE IMMATERIAL. IN OTHER WORDS, THE STATUS OF THE BIDDER AND HIS SUPPLIER WITH REFERENCE TO MARKETING AGREEMENTS, LICENSES, AND ORDERS IS FOR CONSIDERATION, RATHER THAN THE LOCATION OF THE DELIVERY POINT UNDER THE CONTRACT. OF COURSE, IT WOULD BE INCUMBENT UPON THE BIDDER DELETING THE COMPLIANCE REQUIREMENT TO ESTABLISH TO THE SATISFACTION OF THE PURCHASING AGENCY THE FACT THAT NEITHER HE NOR HIS SUPPLIER IS UNDER ANY OBLIGATION OF COMPLIANCE WITH A MARKETING AGREEMENT, LICENSE, OR ORDER APPLICABLE TO ANY COMMODITY UPON WHICH BIDS ARE SUBMITTED UPON THE DATE OF OPENING OF BIDS. ONLY IN CASES WHERE ADMINISTRATIVE DOUBT ARISES AS TO THE BONA FIDES OR SUFFICIENCY OF THE BIDDER'S SHOWING IN THIS RESPECT WOULD IT APPEAR NECESSARY TO APPEAL TO YOUR DEPARTMENT FOR VERIFICATION.

WHILE IT MAY BE RECOGNIZED THAT THE MATTER INVOLVES SOME MEASURE OF ADMINISTRATIVE DIFFICULTY, IN THE PRESENT STATE OF THE LAW SUCH DIFFICULTY DOES NOT JUSTIFY ANY MODIFICATION OF THE CONCLUSION REACHED IN THE DECISION OF MARCH 6, 1937, TO WHICH YOUR LETTER REFERS, AND YOU ARE ADVISED ACCORDINGLY. IT WOULD APPEAR POSSIBLE TO ELIMINATE ANY EXISTING CONFUSION BY ISSUANCE THROUGH THE PROCUREMENT DIVISION OF THE TREASURY OF A LETTER OUTLINING THE RULES HEREIN SET FORTH.