B-150468, DEC. 23, 1963

B-150468, DEC. 23, 1963

TO THE ATTORNEY GENERAL:

WE HAVE RECEIVED A LETTER DATED NOVEMBER 26, 1963, FROM JOHN W. DOUGLAS, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, ASKING FOR CITATIONS TO AUTHORITY FOR A STATEMENT CONTAINED IN THE LAST PARAGRAPH OF OUR DECISION 43 COMP. GEN. 15, B-150468, DATED JULY 2, 1963, TO THE EFFECT THAT CONTRACT DSA-25-S-157 WITH PECK IRON AND METAL CO., INC., COULD BE CANCELED AND THE SURPLUS ANCHORS SOLD THEREUNDER REPLEVIED. IN THE CITED DECISION WE HELD THAT INCLUSION OF A REQUIREMENT IN GOVERNMENT SALES CONTRACTS AND INVITATIONS FOR BIDS THAT SURPLUS ANCHORS BE SCRAPPED, WHERE THIS REQUIREMENT WAS INCLUDED IN ORDER TO AVOID A POSSIBLE ECONOMIC DISLOCATION, WOULD BE CONTRARY TO THE PROVISIONS OF 40 U.S.C. 484 (E), WHICH PROVIDES IN PART:

"/2) WHENEVER PUBLIC ADVERTISING FOR BIDS IS REQUIRED UNDER PARAGRAPH (1) OF THIS SUBSECTION---

(A) THE ADVERTISEMENT FOR BIDS SHALL BE MADE AT SUCH TIME PREVIOUS TO THE DISPOSAL OR CONTRACT, THROUGH SUCH METHODS, AND ON SUCH TERMS AND CONDITIONS AS SHALL PERMIT THAT FULL AND FREE COMPETITION WHICH IS CONSISTENT WITH THE VALUE AND NATURE OF THE PROPERTY INVOLVED; "

THE AUTHORITIES FOR THE PROPOSITION THAT AWARD OF A CONTRACT BY A GOVERNMENT AGENCY CONTRARY TO THE PROVISIONS OF STATUTE IS A NULLITY AND CONFERS NO RIGHTS ON THE CONTRACTOR AGAINST THE UNITED STATES ARE FOUND AT 37 COMP. GEN. 330, 331.

THE CONTROVERSY RESOLVED IN THE SUBJECT DECISION OF JULY 2, 1963, AROSE FROM A PROTEST BY A PROSPECTIVE BUYER AGAINST THE PROPOSED AWARD OF A CONTRACT WHICH WAS TO BE ISSUED UNDER AN INVITATION REQUIRING THE SCRAPPING OF THE ANCHORS TO BE PURCHASED. SUBSEQUENTLY, THE PROSPECTIVE BUYER, PECK, ALSO COMPLAINED OF A SIMILAR SCRAPPING REQUIREMENT IN AN EXISTING CONTRACT AWARDED TO PECK SOME MONTHS BEFORE ITS CURRENT PROTEST. THE FACT THAT PECK AND POSSIBLY OTHER BUYERS MIGHT HAVE OUTSTANDING CONTRACTS WHICH CONTAINED THE SCRAPPING PROVISION HAD NO LEGAL RELEVANCE TO THE PRIMARY ISSUE BEFORE US, I.E., WHETHER PROCURING ACTIVITIES HAD AUTHORITY TO INCLUDE THE SUBJECT PROVISION IN INVITATIONS FOR BIDS AND RESULTING CONTRACTS. NONETHELESS, WE INFORMALLY REQUESTED INFORMATION FROM THE DEFENSE SUPPLY AGENCY (DSA) AS TO WHETHER, UNDER THE CONTRACT WITH PECK, TITLE TO THE ANCHORS PASSED UPON DELIVERY OR UPON SCRAPPING. WE WERE ADVISED THAT THE DSA CONTRACT FORM CONTAINED A STANDARD PROVISION STATING THAT TITLE WOULD NOT PASS UNTIL THE ANCHORS HAD BEEN SCRAPPED. HAVE SINCE BEEN INFORMED THAT AN OLDER NAVY FORM HAD BEEN INADVERTENTLY USED FOR THE CONTRACT WITH PECK, AND THAT THE LANGUAGE OF THIS FORM DID NOT DELAY THE PASSAGE OF TITLE UNTIL SCRAPPING HAD OCCURRED.

SECTION 203 (D) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 385, 40 U.S.C. 484 (D), PROVIDES:

"/D) VALIDITY OF DEED, BILL OF SALE, LEASE, ETC.

"A DEED, BILL OF SALE, LEASE, OR OTHER INSTRUMENT EXECUTED BY OR ON BEHALF OF ANY EXECUTIVE AGENCY PURPORTING TO TRANSFER TITLE OR ANY OTHER INTEREST IN SURPLUS PROPERTY UNDER THIS SUBCHAPTER SHALL BE CONCLUSIVE EVIDENCE OF COMPLIANCE WITH THE PROVISIONS OF THIS SUBCHAPTER INSOFAR AS CONCERNS TITLE OR OTHER INTEREST OF ANY BONA FIDE GRANTEE OR TRANSFEREE FOR VALUE AND WITHOUT NOTICE OF LACK OF SUCH COMPLIANCE.'

AS YOU KNOW, IF THE ABOVE-QUOTED SECTION MAKES PECK'S BILL OF SALE CONCLUSIVE EVIDENCE THAT PECK IS A BONA FIDE GRANTEE WITHOUT NOTICE OF LACK OF COMPLIANCE WITH THE STATUTE, IT MAY BE OF LITTLE CONSEQUENCE THAT THE CONTRACTING OFFICER HAD NO AUTHORITY TO CONVEY SUCH TITLE. SEE UNITED STATES V. JONES, 176 F.2D 278 (9TH CIR., 1949); EDWARD B. TURNEY V. UNITED STATES, 126 CT.CL. 202 (1953); EAST TENNESSEE IRON AND METAL COMPANY V. UNITED STATES, 218 F.SUPP. 377 (E.D. TENN., N.D., 1963). HOWEVER, IN EACH OF THE THREE CITED CASES, THE CONTRACTING OFFICER HAD ACTED CONTRARY TO ADMINISTRATIVE RATHER THAN STATUTORY DIRECTION.

IT IS TRUE THAT THE QUOTED LANGUAGE OF 40 U.S.C. 484 (D) IS ESSENTIALLY NO DIFFERENT THAN THAT CONTAINED IN SECTION 25 OF THE SURPLUS PROPERTY ACT OF 1944, 58 STAT. 780, WHICH SECTION ESTABLISHED THE BASIS OF RECOVERY IN EACH OF THE THREE CASES. HOWEVER, UNDER BOTH THE SURPLUS PROPERTY ACT OF 1944 AND THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, THERE WERE VIRTUALLY NO STATUTORY PRESCRIPTS ON THE PROCEDURES FOR SELLING SURPLUS GOODS. THE RULES OF ADVERTISED BIDDING WERE NOT FOR APPLICATION, AND THE TERMS AND CONDITIONS OF SALES WERE ENTIRELY ESTABLISHED AT THE UNLIMITED DISCRETION OF THE ADMINISTRATOR OF GENERAL SERVICES ADMINISTRATION. CONSEQUENTLY, AT LEAST UNTIL THE PASSAGE IN 1958 OF PUBLIC LAW 85-486, 40 U.S.C. 484 (E), THE PRESUMPTION UNDER 484 (D) THAT A BILL OF SALE EVIDENCED "COMPLIANCE WITH THE PROVISIONS OF THIS SUBCHAPTER" (TITLE) WAS IN PRACTICAL EFFECT NO MORE THAN A PRESUMPTION OF COMPLIANCE WITH ADMINISTRATIVE REGULATIONS.

IN 1958, THE CONGRESS ESTABLISHED A SPECIFIC STATUTORY MANDATE GOVERNING THE METHODS OF SURPLUS DISPOSALS. WE THINK IT MAY BE PERSUASIVELY ARGUED THAT AFTER THE PASSAGE OF THE 1958 AMENDMENT, NO GRANTEE COULD BE "WITHOUT NOTICE OF LACK OF SUCH COMPLIANCE" WHERE THE FAILURE OF COMPLIANCE INVOLVED A STATUTORY RATHER THAN AN ADMINISTRATIVE PROHIBITION. OTHERWISE, BUYERS WOULD BE HELD TO HAVE ENFORCEABLE CONTRACTS EVEN IF THE SALE WAS MADE WITHOUT REQUIRED ADVERTISING, WITH INSUFFICIENT ADVERTISING, WITH INSUFFICIENT TIME FOR PREPARING BIDS, WITHOUT FULL AND FREE COMPETITION CONSISTENT WITH THE VALUE AND NATURE OF THE PROPERTY INVOLVED, AND WITHOUT CONSIDERATION OF THE BIDDER'S RESPONSIBILITY, RESPONSIVENESS OR OFFERED PRICE. WE SUGGEST THAT SUCH A RESULT MAY NOT BE ENTIRELY COMMENSURATE WITH CONGRESSIONAL INTENT.

THERE IS ALSO FOR CONSIDERATION THE POSSIBILITY THAT IF PECK IS A BONA FIDE PURCHASER FOR VALUE, IT IS A PURCHASER OF ANCHORS WHICH MUST BE SCRAPPED. IT MAY BE ARGUED THAT IF PECK HAS A VALID CONTRACT NOTWITHSTANDING THE INCLUSION OF A CONDITION PROHIBITED BY A CIVIL STATUTE, THE AVOIDANCE OF WHICH CONDITION CHANGES THE NATURE AND VALUE OF THE PROPERTY PURCHASED, THE CONDITION CONTAINED THEREIN SHOULD BE CONSIDERED ENFORCEABLE BY THE GOVERNMENT IN ORDER TO MAINTAIN THE ESSENCE OF THE THING BARGAINED FOR.