A-17207, MARCH 1, 1927, 6 COMP. GEN. 557

A-17207, MARCH 1, 1927, 6 COMP. GEN. 557

ADVERTISING, BIDS - RESPONSIBILITY OF NEWLY ORGANIZED BIDDERS THE GOVERNMENT SERVICES ARE REQUIRED GENERALLY TO ADVERTISE FOR PROPOSALS FOR CONTRACTS TO BE MADE BY THEM, THE PURPOSE OF WHICH IS TO GIVE ALL EQUAL RIGHT TO COMPETE FOR GOVERNMENT BUSINESS; SECURE TO THE GOVERNMENT THE BENEFIT OF COMPETITION; PREVENT FAVORITISM IN PUBLIC PURCHASES AND PREVENT COLLUSION AND FRAUD IN LETTING PUBLIC CONTRACTS. SIMILAR ADVERTISING REQUIREMENTS HAVE BEEN IMPOSED UPON THE POST OFFICE DEPARTMENT FOR THE CARRYING OF MAILS, WITH SOME SPECIFIC STATUTORY EXCEPTIONS, IN VIEW OF WHICH THERE APPEARS NO REASON WHY THERE SHOULD NOT BE ADVERTISING FOR BIDS FOR THE CARRYING OF MAIL BY AIRPLANE, IN THE ABSENCE OF SPECIFIC STATUTORY EXCEPTION THEREFROM. A BIDDER IS NOT TO BE CONSIDERED AS NOT ACCEPTABLE BECAUSE NEWLY ORGANIZED OR ORGANIZED FOR THE EXPRESS PURPOSE OF THE WORK, ESPECIALLY IF PERFORMANCE BOND IS TO BE EXACTED. NEW SERVICES MAY REQUIRE NEW ORGANIZATIONS TO BE FORMED, AND BE IN THE INTEREST OF THE UNITED STATES TO THUS OBTAIN BIDDERS.

COMPTROLLER GENERAL MCCARL TO THE POSTMASTER GENERAL, MARCH 1, 1927:

I HAVE RECEIVED YOUR LETTER OF FEBRUARY 14, 1927, AS FOLLOWS:

YOU ARE AWARE OF THE FACT THAT THE POSTMASTER GENERAL HAS ALREADY, OPERATING UNDER THE KELLY LAW, LEASED THE WESTERN DIVISION OF THE TRANSCONTINENTAL AIR MAIL, CHICAGO TO SAN FRANCISCO, TO THE BOEING AIRPLANE COMPANY, AND THAT HE RECENTLY REJECTED ALL BIDS RECEIVED FOR THE EASTERN SECTION OF THE SAME SERVICE BETWEEN NEW YORK AND CHICAGO.

THERE ARE CERTAIN FACTS AND ELEMENTS ENTERING INTO THE CALCULATIONS WITH REFERENCE TO THE EASTERN SECTION THAT IMPOSE UNUSUAL CONDITIONS AND WHICH CALL FOR THE UTMOST CARE AND CONSIDERATION. IT IS UNDERSTOOD THAT THE DEPARTMENT PROPOSES EITHER BY DIRECT NEGOTIATION OR BY ADVERTISING FOR BIDS TO AWARD TO PRIVATE CONTRACTORS THE BUSINESS OF CARRYING ON THE EASTERN BRANCH, NEW YORK TO CHICAGO. THE POSTMASTER GENERAL HAS REASON TO BELIEVE THAT SOME OF THE COMPANIES AND INDIVIDUALS WHO MIGHT BID FOR THIS SERVICE AT PUBLIC LETTING ARE OF DOUBTFUL CHARACTER AND THAT SOME OF THEM CONTEMPLATE BIDDING FROM MOTIVES THAT OUGHT TO EXCLUDE THEM FROM CONSIDERATION. THE POST OFFICE DEPARTMENT HAS FOR SOME YEARS GIVEN MUCH TIME AND THOUGHT AND EXPENDED A VERY LARGE SUM OF MONEY IN ESTABLISHING ON A GOOD AND SUBSTANTIAL BASIS A TRANSCONTINENTAL AIR-MAIL SERVICE. IT IS NOW FELT THAT IT WOULD BE TO THE DECIDED DISADVANTAGE OF THE GOVERNMENT, AND PROBABLY RESULT IN THE WRECKAGE OF THE SERVICE ON WHICH THERE HAS BEEN SUCH GREAT EXPENDITURE OF TIME, EFFORT AND MONEY IF IT WERE PERMITTED TO PASS INTO INCOMPETENT HANDS, ESPECIALLY ON THE EASTERN DIVISION, WHERE THE SERVICE TO BE RENDERED IS ATTENDED BY UNUSUAL HAZARD AND EXCEPTIONAL CONDITIONS.

AS I READ THE AMENDMENT TO THE SO-CALLED KELLY LAW, ADOPTED IN JUNE, 1926, THE POSTMASTER GENERAL IS GIVEN AUTHORITY TO CONTRACT WITH COMPANIES OR INDIVIDUALS FOR THE TRANSPORTATION OF AIR MAIL AT SUCH RATES AND UNDER SUCH RULES AND REGULATIONS AS HE MAY PRESCRIBE, NOT EXCEEDING $3.00 A POUND.

I AM FULLY PERSUADED THAT, ALL THINGS CONSIDERED, THE ULTIMATE BEST INTERESTS OF THE GOVERNMENT AND THE SERVICE CAN BE BEST SUBSERVED THROUGH THE EXERCISE BY THE POSTMASTER GENERAL OF THE FULL AUTHORITY GRANTED UNDER THE AMENDED LAW ABOVE QUOTED. BEFORE TAKING SUCH ACTION, HOWEVER, THE MATTER IS HEREWITH OFFICIALLY SUBMITTED, WITH THE REQUEST THAT YOU, AS COMPTROLLER GENERAL, GIVE ME YOUR OPINION AS TO THE VALIDITY OF THE CONSTRUCTION I HAVE PLACED UPON THE LAW AND HOW YOU WOULD BE DISPOSED TO REGARD A CONTRACT MADE WITHIN THOSE LIMITATIONS.

THE CONGRESS HAS REQUIRED GENERALLY OF THE GOVERNMENT SERVICES, BY SECTION 3709 OF THE REVISED STATUTES, THAT THEIR CONTRACTS SHALL BE MADE AFTER ADVERTISING A SUFFICIENT TIME PREVIOUSLY FOR PROPOSALS RESPECTING SAME. IT HAS BEEN FREQUENTLY HELD BY THE COURTS AND BY THE ACCOUNTING OFFICERS OF THE UNITED STATES THAT THE PROVISIONS OF THE STATUTE ARE DESIGNED TO GIVE ALL MANUFACTURERS, ETC., EQUAL RIGHT TO COMPETE FOR GOVERNMENT BUSINESS; SECURE TO THE GOVERNMENT THE BENEFITS WHICH FLOW FROM COMPETITION; TO PREVENT UNJUST FAVORITISM BY REPRESENTATIVES OF THE GOVERNMENT IN MAKING PURCHASES ON PUBLIC ACCOUNT; AND TO PREVENT COLLUSION AND FRAUD IN PROCURING SUPPLIES OR LETTING CONTRACTS.

THE ACTS OF MARCH 1, 1881, 21 STAT. 374; MAY 12, 1910, 36 STAT. 366, REQUIRE THE POSTMASTER GENERAL TO MAKE ADVERTISEMENT OF ALL GENERAL MAIL LETTINGS OF EACH STATE AND TERRITORY, TO BE POSTED IN EACH POST OFFICE NAMED IN THE ADVERTISEMENT.

SECTION 3942 OF THE REVISED STATUTES AUTHORIZES THE POSTMASTER GENERAL TO "ENTER INTO CONTRACTS FOR CARRYING THE MAIL WITH RAILWAY COMPANIES, WITHOUT ADVERTISING FOR BIDS THEREFOR," AND SECTION 3943 SIMILARLY PROVIDES IN SUBSTANCE FOR CARRYING THE MAIL BY VESSELS UPON THE WATERS OF THE UNITED STATES OR BETWEEN PORTS OF THE UNITED STATES.

THE TRANSMISSION OF MAIL BY PNEUMATIC TUBES WAS EXPRESSLY REQUIRED TO BE CONTRACTED FOR AFTER PUBLIC ADVERTISEMENT IN THE NEWSPAPERS AND IN FORM TO INVITE COMPETITIVE BIDDING; AWARD TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER. ACT OF APRIL 21, 1902, 32 STAT. 114.

SECTION 3949 OF THE REVISED STATUTES PROVIDES THAT "ALL CONTRACTS FOR CARRYING THE MAIL SHALL BE IN THE NAME OF THE UNITED STATES AND SHALL BE AWARDED TO THE LOWEST BIDDER TENDERING SUFFICIENT GUARANTIES FOR FAITHFUL PERFORMANCE IN ACCORDANCE WITH THE TERMS OF THE ADVERTISEMENT * * *.'

IT APPEARS THAT THE POSTMASTER GENERAL HAS BEEN ALWAYS GIVEN A WIDE DISCRETION CONCERNING CONTRACTS, THE MAKING OF THEM, WITH WHOM, AND UPON WHAT TERMS. SEE THE MAIL DIVISOR CASES, 251 U.S. 329. IT WILL BE OBSERVED, HOWEVER, FROM THE ENACTMENTS CITED THAT THE GENERAL REQUIREMENT OF THE CONGRESS IS THAT THERE BE ADVERTISING FOR COMPETITIVE BIDS FOR MAIL CARRYING, AND THAT WHERE EXCEPTIONS ARE INTENDED FROM SUCH REQUIREMENT THE CONGRESS HAS EXPRESSLY SO STATED, AS IN THE INSTANCES OF RAILWAY AND VESSEL CARRYING OF MAIL. WE MAY ASSUME THAT WITHOUT SUCH EXCEPTION ADVERTISING FOR SO CARRYING THE MAIL WOULD HAVE BEEN COMPULSORY.

THERE ARE FACTORS IN THE CARRYING OF THE MAIL UNDER THE MODES OF TRANSPORTATION THAT MAINTAINED PRIOR TO THE ESTABLISHMENT OF AIR MAIL SERVICE WHICH UNDER THE STATUTES CITED PERMITTED THE POSTMASTER GENERAL TO SPECIFY THE RATES AND ALSO IN A GENERAL SENSE THE CONTRACTOR. THIS MAY BE VIEWED PARTICULARLY AS OCCASIONED BY THE LIMITATIONS OF MAIL CARRIERS PRIMARILY TO ESTABLISHED RAILROADS PERMITTING NO OTHER ALTERNATIVE THAN TO USE SUCH RAILROADS UNDER WHICH ADVERTISING FOR COMPETITION WOULD HAVE BEEN PRACTICALLY USELESS. IT DOES NOT PERMIT A CONCLUSION THAT CARRYING OF THE MAIL BY AIR MAY LIKEWISE BE SO CONTRACTED FOR IN THE ABSENCE OF CLEAR STATUTORY AUTHORITY.

THE ACT OF FEBRUARY 2, 1925, 43 STAT. 805, AS AMENDED BY THE ACT OF JUNE 3, 1926, 44 STAT. 692, AUTHORIZED THE POSTMASTER GENERAL TO CONTRACT FOR THE TRANSPORTATION OF MAIL BY AIRCRAFT "AT FIXED RATES" AND "UNDER SUCH RATES, RULES, AND REGULATIONS AS HE MAY PRESCRIBE" NOT EXCEEDING CERTAIN RATES SPECIFIED IN THE ENACTMENT. THE TENOR OF THE PROVISION IS NOT UNLIKE THAT UNDER WHICH RATES WERE PRESCRIBED BY LAW FOR CARRYING MAIL BY RAILROADS--- SECTION 4002, REVISED STATUTES; ACT OF JULY 28, 1916, 39 STAT. 425--- BUT APPARENTLY THE AUTHORITY TO CONTRACT FOR RAILROAD CARRYING WITHOUT ADVERTISING DID NOT ARISE FROM SUCH STATUTORY PROVISIONS BUT FROM THE SPECIFIC EXCEPTION MADE BY SECTION 3942, REVISED STATUTES, CITED.

THE AIR IS AN OPEN FIELD WITHOUT RIGHTS OF WAY OR ROUTES BEING WITHIN THE CONTROL OR MONOPOLY OF ANYONE, BUT APPARENTLY OPEN TO ALL WHO MAY FURNISH OR SATISFY OF THEIR ABILITY TO FURNISH THE EQUIPMENT, ETC., TO CARRY OUT AN UNDERTAKING. THIS MAY BE A TEST IN AWARDING BIDS BUT IT DOES NOT FOLLOW THAT A COMPANY OR ANY BIDDER RECENTLY ORGANIZED MUST BE CONSIDERED AS NOT ACCEPTABLE BECAUSE OF THAT FACT ALONE. THE PAPERS SUBMITTED SHOW THAT IN FACT ONE OF THE AIR-MAIL CARRIERS ORGANIZED IN 1925 WAS AWARDED A CONTRACT AND DID SUCCESSFULLY CARRY THE MAIL, SO THAT IT CAN NOT BE SAID THAT RECENT ORGANIZATION IS A MATERIAL DECIDING FACTOR. THIS MAY AGAIN BE EMPHASIZED FROM THE FACT THAT THE PROPOSALS IN THE INSTANT MATTER STIPULATED THE CARRYING OF THE MAIL SHOULD BEGIN SIX MONTHS AFTER THE AWARD WAS MADE TO THE SUCCESSFUL BIDDER, WHICH PERIOD OF TIME PROBABLY WAS GIVEN FOR THE EXPRESS PURPOSE OF ENABLING SUCH BIDDER TO PREPARE FOR THE WORK; BUT EVEN IF NOT, IT APPEARS A SUFFICIENT TIME WITHIN WHICH A NEW AND UNTRIED BIDDER COULD GET INTO WORKING CONDITION. I AM CONSTRAINED, THEREFORE, TO THINK THAT SIMPLY BEING NEWLY ORGANIZED OR ORGANIZED FOR THE EXPRESS PURPOSE DOES NOT ALONE ENTITLE TO REJECT SUCH BIDDERS, ESPECIALLY IN VIEW OF YOUR AUTHORITY AND APPARENT PURPOSE TO EXACT A PERFORMANCE BOND IN ADEQUATE AMOUNT. AND AGAIN, HAVING IN MIND THE NEWNESS OF THE SERVICE AND ITS OPENNESS IN THE MATTER OF RIGHT OF WAY, IT SUGGESTS THAT THERE OUGHT TO BE ADVERTISING FOR BIDS TO INDUCE AND BRING OUT BIDDERS TO COME INTO THE FIELD SO THAT RELIANCE MAY NOT IMMEDIATELY OR IN THE FUTURE BE RESTED UPON ONLY A FEW. THE INTERESTS OF THE UNITED STATES WOULD SEEM TO REQUIRE A GOODLY NUMBER IN SUCH UNDERTAKING.

THE CONCLUSION SEEMS CLEARLY WARRANTED THAT THE NEEDS AND INTERESTS OF THE UNITED STATES REQUIRE ADVERTISING TO INDUCE BIDDERS OR COMPANIES TO ENTER THE FIELD AND IN COMPETITION, AND IN THIS IT IS NOT A MATERIAL FACTOR AUTHORIZING ELIMINATION OF THE BIDDER WHO IS THE LOWEST BIDDER BECAUSE A COMPANY ONLY RECENTLY ORGANIZED. THERE UNQUESTIONABLY HAVE BEEN INSTANCES WHERE ORGANIZATIONS HAVE BEEN FORMED FOR THE PARTICULAR PURPOSE OF DOING A WORK ONLY WHEN THE DOING OF THE WORK AROSE, AND WHICH ORGANIZATIONS HAD NOT THERETOFORE ANY EXISTENCE. EXPERIENCE MAY BE A FACTOR, BUT THAT IS NOT EXCLUSIVE; IT MAY BE ACQUIRED OR OBTAINED. THERE APPEARS NO REASON WHY ADVERTISING FOR BIDS IS NOT INCUMBENT OR IS NOT CONTEMPLATED BY THE LAW.