B-43730, OCTOBER 4, 1944, 24 COMP. GEN. 272

B-43730: Oct 4, 1944

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1944: I HAVE YOUR LETTER OF SEPTEMBER 25. AS FOLLOWS: I HAVE YOUR OPINION OF AUGUST 21. WE HAVE SEVERAL SUCH ARRANGEMENTS MADE OR CONTEMPLATED. FOR PURPOSES OF SIMPLICITY I WILL DESCRIBE THAT RELATING TO SOUTHERN PINE LUMBER. WHICH IS TYPICAL OF THE OTHERS. MAXIMUM PRICES FOR SOUTHERN PINE LUMBER ARE ESTABLISHED BY OUR MAXIMUM PRICE REGULATION NO. 19. THE GRADE DESCRIPTIONS USED IN THE REGULATION ARE THOSE WHICH HAVE BEEN ESTABLISHED AND DEFINED. ARE FROM TIME TO TIME REDEFINED. THE GRADING RULES OF THE SOUTHERN PINE ASSOCIATION HAVE BEEN PROMULGATED PURSUANT TO THE AMERICAN LUMBER STANDARDS FOR SOFTWOOD LUMBER. WAS APPROVED ON MAY 20. THE SPECIFICATION PROVIDES THAT SOFTWOOD LUMBER PURCHASED BY FEDERAL AGENCIES SHALL CONFORM TO THE GRADING RULES OF THE VARIOUS LUMBER ASSOCIATIONS WHICH ARE APPROVED BY THE CENTRAL COMMITTEE ON LUMBER STANDARDS AS IN CONFORMANCE WITH " AMERICAN LUMBER STANDARDS.

B-43730, OCTOBER 4, 1944, 24 COMP. GEN. 272

PERSONAL SERVICE - EMPLOYMENT BY CONTRACT - LUMBER INSPECTION SERVICES IN VIEW OF THE CIRCUMSTANCES NOW SHOWN TO BE PECULIARLY APPLICABLE TO THE PROCUREMENT OF LUMBER INSPECTION SERVICES (UNAVAILABILITY OF QUALIFIED INDIVIDUAL INSPECTORS; CONTROL ENTIRELY BY ORGANIZATIONS OR ASSOCIATIONS; INCLUSION OF LABORATORY SERVICE AND USE OF EQUIPMENT; THE MATERIALITY OF THE "PROBATIVE VALUE" ATTACHING TO CERTAIN LUMBER ASSOCIATIONS' STATUS IN THE INDUSTRY), THE OFFICE OF PRICE ADMINISTRATION MAY CONTRACT WITH A LUMBER ASSOCIATION TO FURNISH LUMBER INSPECTION SERVICES IN CONNECTION WITH DETERMINING VIOLATIONS OF CEILING PRICES ON LUMBER--- A DUTY IMPOSED BY LAW ON SAID OFFICE--- WITHOUT REGARD TO THE CLASSIFICATION ACT. COMP. GEN. 147, MODIFIED.

COMPTROLLER GENERAL WARREN TO THE PRICE ADMINISTRATOR, OFFICE OF PRICE ADMINISTRATION, OCTOBER 4, 1944:

I HAVE YOUR LETTER OF SEPTEMBER 25, 1944, REFERENCE 502, AS FOLLOWS:

I HAVE YOUR OPINION OF AUGUST 21, B-43730 DEALING WITH LUMBER INSPECTION AND ADVERTISING SERVICES.

I AM SORRY TO SAY THAT MY LETTER OF AUGUST 5 WHICH SUBMITTED THE QUESTIONS FOR YOUR OPINION DID NOT FULLY DESCRIBE OUR ARRANGEMENTS FOR THE USE OF LUMBER GRADING FACILITIES. I WISH, THEREFORE, TO SUBMIT AN ACCURATE DESCRIPTION OF THESE ARRANGEMENTS AND THE FACTORS WHICH LED TO THEIR MAKING, IN ORDER TO OBTAIN YOUR OPINION THEREON. WE HAVE SEVERAL SUCH ARRANGEMENTS MADE OR CONTEMPLATED, BUT FOR PURPOSES OF SIMPLICITY I WILL DESCRIBE THAT RELATING TO SOUTHERN PINE LUMBER, WHICH IS TYPICAL OF THE OTHERS.

MAXIMUM PRICES FOR SOUTHERN PINE LUMBER ARE ESTABLISHED BY OUR MAXIMUM PRICE REGULATION NO. 19. THIS REGULATION SETS DOLLARS-AND CENTS CEILING PRICES FOR THE DIFFERENT GRADES AND SPECIFICATIONS OF THAT LUMBER WITH, OF COURSE, THE CEILINGS VARYING ACCORDING TO THE RELATIVE VALUE OF THE GRADE AND SPECIFICATION BEING PRICED.

THE GRADE DESCRIPTIONS USED IN THE REGULATION ARE THOSE WHICH HAVE BEEN ESTABLISHED AND DEFINED, AND ARE FROM TIME TO TIME REDEFINED, BY THE SOUTHERN PINE ASSOCIATION, A LUMBER TRADE ASSOCIATION.

THE GRADING RULES OF THE SOUTHERN PINE ASSOCIATION HAVE BEEN PROMULGATED PURSUANT TO THE AMERICAN LUMBER STANDARDS FOR SOFTWOOD LUMBER, ESTABLISHED BY THE NATIONAL BUREAU OF STANDARDS OF THE UNITED STATES DEPARTMENT OF COMMERCE. I CALL YOUR ATTENTION TO THE PUBLICATION ISSUED BY THE DEPARTMENT OF COMMERCE UNDER THE TITLE OF " SIMPLIFIED PRACTICE RECOMMENDATION R-16-39.'

THE FEDERAL SPECIFICATION FOR SOFTWOOD LUMBER, PUBLICATION MM-L 751C, WAS APPROVED ON MAY 20, 1944, BY THE DIRECTOR OF PROCUREMENT FOR THE USE OF ALL DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT. THE SPECIFICATION PROVIDES THAT SOFTWOOD LUMBER PURCHASED BY FEDERAL AGENCIES SHALL CONFORM TO THE GRADING RULES OF THE VARIOUS LUMBER ASSOCIATIONS WHICH ARE APPROVED BY THE CENTRAL COMMITTEE ON LUMBER STANDARDS AS IN CONFORMANCE WITH " AMERICAN LUMBER STANDARDS," AND LISTS THE NAMES OF THE APPROVED ASSOCIATIONS. THE SOUTHERN PINE ASSOCIATION IS THE ONLY ONE NAMED WITH RESPECT TO SOUTHERN PINE LUMBER EXCEPT AS TO ARKANSAS SOFT PINE LUMBER. HOWEVER, THE ARKANSAS SOFT PINE BUREAU HAS ADOPTED AND REPRINTED WITH A FEW MINOR CHANGES THE RULES OF THE SOUTHERN PINE ASSOCIATION.

THE PUBLICATION OF THE DIRECTOR OF PROCUREMENT, REFERRED TO ABOVE, STATES:

"IT IS DESIRABLE THAT FEDERAL ORGANIZATIONS BUYING LUMBER GIVE CAREFUL CONSIDERATION TO THE FITNESS OF AGENCIES WHOM THEY ALLOW TO INSPECT LUMBER FOR THEM. INCLUDED AMONG THE FACTORS THAT ARE A MEASURE OF FITNESS ARE THE FOLLOWING: THE STANDING AND RESPONSIBILITY OF THE AGENCIES, THE EXPERIENCE AND ABILITY OF THEIR LUMBER INSPECTORS, PROVISION FOR OBTAINING PRACTICALLY THE SAME RESULTS FROM THE INSPECTION OF THE SAME MATERIAL BY DIFFERENT INSPECTORS OR BY THE SAME INSPECTORS ON REINSPECTION, AND THE ABILITY OF THE AGENCY TO ACT PROMPTLY AND TO MAKE REINSPECTIONS WHEN NECESSARY AT PLACES DISTANT FROM THE ORIGINAL PLACE OF INSPECTION.'

IT APPEARS, THEREFORE, THAT THE FEDERAL GOVERNMENT HAS HISTORICALLY RECOGNIZED THE PROPRIETY OF OBTAINING LUMBER GRADING SERVICES BY CONTRACT WITH ASSOCIATIONS RATHER THAN BY HIRING EMPLOYEES. THIS PRACTICE APPLIES TO THE GRADING OF FEDERALLY PURCHASED LUMBER, BUT OBVIOUSLY THE REASONS FOR IT APPLY EQUALLY TO GRADING FOR PURPOSES OF ENFORCING THE EMERGENCY PRICE CONTROL ACT.

ALL ACTIVITIES OF THE SOUTHERN PINE ASSOCIATION DEALING WITH INSPECTION SERVICES ARE CONDUCTED BY THE SOUTHERN PINE INSPECTION BUREAU OF THAT ASSOCIATION. THIS BUREAU IS REQUIRED BY THE AMERICAN LUMBER STANDARDS TO MAINTAIN ADEQUATE GRADING FACILITIES WHICH MAY BE UTILIZED ON A COMMERCIAL BASIS BY MEMBERS AND NON-MEMBERS ALIKE. IF THE SELLER OR THE BUYER OF SOUTHERN PINE LUMBER DESIRE AN INDEPENDENT GRADING, THE COMMERCIAL SERVICES OF THE SPIB ARE OBTAINED, AND GRADING BY THE SPIB IS REGARDED AS CONCLUSIVE OF DISPUTES BETWEEN BUYER AND SELLER. THE SPIB IS THE ONLY AGENCY WITH RESPECT TO SOUTHERN PINE LUMBER WHICH MEETS ALL OF THE TESTS LAID DOWN IN THE FEDERAL SPECIFICATION FOR DETERMINING THE FITNESS OF AN AGENCY TO INSPECT LUMBER FOR FEDERAL ORGANIZATIONS BUYING LUMBER.

THE GRADING OF LUMBER REQUIRES SKILLED AND EXPERIENCED PERSONNEL, WHO MUST BE THOROUGHLY FAMILIAR WITH AND ABLE TO APPLY THE GRADING RULES AND STANDARDS OF THE SOUTHERN PINE ASSOCIATION. THE GRADER ALSO MAKES USE OF CERTAIN EQUIPMENT, INCLUDING A MOISTURE CONTENT REGISTER TO DETERMINE THE MOISTURE CONTENT OF THE LUMBER. OCCASIONALLY, A PIECE OF THE LUMBER BEING INSPECTED IS SUBJECTED TO LABORATORY TESTS BY THE SPIB TO RESOLVE A PARTICULARLY DIFFICULT QUESTION OF GRADING. THE GRADER'S REPORT IS NOT SENT DIRECTLY TO THE PERSON WHO PURCHASED THE SPIB'S GRADING SERVICE. INSTEAD, THE GRADER SENDS HIS REPORT TO THE SPIB'S HOME OFFICE IN NEW ORLEANS WHERE IT IS REVIEWED AND PROCESSED, AND FROM WHICH A FINAL REPORT IS SENT TO THE PURCHASER OF THE SERVICE.

ABOUT TWO YEARS AGO IT BECAME APPARENT TO THIS OFFICE THAT NUMEROUS SELLERS OF SOUTHERN PINE LUMBER WERE VIOLATING THE PRICE CEILINGS BY SELLING LOW AND MEDIUM GRADE LUMBER AS, AND AT CEILING PRICE FOR, HIGH GRADE LUMBER. IT WAS APPARENT THAT OUR ABILITY TO SECURE COMPLIANCE WITH OUR LUMBER CEILINGS BY CHECKING THIS UPGRADING DEPENDED ON OUR ABILITY TO OBTAIN GRADING SERVICES. WE MADE ALL POSSIBLE ATTEMPTS TO EMPLOY PERSONNEL QUALIFIED TO GRADE LUMBER, BUT WERE UNABLE TO OBTAIN ANY SUCH PERSONNEL; NOR WAS THE CIVIL SERVICE COMMISSION ABLE TO SUPPLY US WITH THE NAMES OF ANY QUALIFIED LUMBER GRADERS. WE SOUGHT THE ASSISTANCE OF OTHER FEDERAL AGENCIES, INCLUDING THE FOREST SERVICE AND THE BUREAU OF STANDARDS, AND ASCERTAINED THAT NO FEDERAL AGENCY EMPLOYS LUMBER GRADERS.

WE THEREFORE ENTERED INTO A CONTRACT WITH THE SOUTHERN PINE INSPECTION BUREAU WHEREBY IT AGREED TO SUPPLY, UPON ORDER FROM US, ITS GRADING SERVICES TO GRADE ANY SHIPMENT DESIGNATED BY US. THE SERVICE IS FURNISHED BY THE SPIB, USING SUCH OF ITS EMPLOYEES AS IT DEEMS APPROPRIATE, AND GRADING REPORTS ARE SENT TO US, ALL IN ACCORDANCE WITH THE PROCEDURE DESCRIBED ABOVE APPLICABLE TO ITS ORDINARY COMMERCIAL SALES OF ITS SERVICES.

OUR CONTRACT WITH THE SPIB ALSO HAS THREE PRACTICAL VIRTUES: (1) IT IS MORE ECONOMICAL TO PURCHASE ITS SERVICES THAN TO EMPLOY AND MAINTAIN A REGULAR STAFF OF GRADERS (IF SUCH EMPLOYEES COULD BE HIRED) BECAUSE OF THE UNCERTAINTY AS TO HOW OFTEN OR WHERE GRADING IS NEEDED AND THE EXTENSIVE TRAVEL EXPENSES WHICH WOULD BE REQUIRED; (2) IT PERMITS HAVING A GRADER AVAILABLE FOR DUTY IMMEDIATELY AT ANY DESIGNATED LOCATION ON CALL; (3) SPIB GRADINGS ARE, BECAUSE OF THEIR INDUSTRY STANDING, OF GREAT PROBATIVE VALUE IN COURT PROCEEDINGS.

WE BELIEVE THAT UNDER THE CIRCUMSTANCES WE ARE LAWFULLY ENTITLED TO UTILIZE OUR GENERAL APPROPRIATION TO PURCHASE THE SPIB SERVICES. IN THIS CONNECTION, THE FOLLOWING FACTS ARE, IN OUR OPINION, ESPECIALLY WEIGHTY:

1. CONTRARY TO THE IMPLICATIONS OF MY LETTER OF AUGUST 5, WE DO NOT EMPLOY THE PERSONAL SERVICES OF INDIVIDUAL GRADERS. INSTEAD, WE BUY A SERVICE FROM AN ORGANIZATION, WHICH SUPPLIES THAT SERVICE THROUGH ITS OWN FACILITIES AND EMPLOYEES. SINCE WE DO NOT DESIGNATE OR SELECT, AND HAVE NO CONTROL OVER, THE SPIB EMPLOYEES, THERE IS OBVIOUSLY NO CIRCUMVENTION OF THE CLASSIFICATION ACT BY ATTEMPTING TO HIRE INDIVIDUALS ON A CONTRACT BASIS TO DO WORK WHICH THEY MUST DO INDIVIDUALLY UNDER THE CONTRACT. ADDITION, THE SERVICE WE PURCHASE IS AN ORGANIZATIONAL RATHER THAN PERSONAL SERVICE SINCE IT INCLUDES THE CONTROL OFFICE REVIEW AND PROCESSING OF GRADING REPORTS, THE AVAILABILITY OF LABORATORY SERVICES, THE USE OF EQUIPMENT, THE PROBATIVE VALUE ATTACHING TO THE ASSOCIATION'S STATUS IN THE INDUSTRY, AND THE CIRCUMSTANCE THE CONTRACT GRADING IS SUPPLIED COMMERCIALLY ONLY BY THE SPIB AND NOT BY INDIVIDUALS.

DISTINCTIONS ALONG THESE LINES HAVE BEEN RECOGNIZED BY YOU IN A NUMBER OF OPINIONS, INCLUDING INSTANCES IN WHICH THE SERVICE REQUIRED LESS TECHNICAL SKILL THAN LUMBER GRADING. THUS YOU HAVE RULED THAT AN AGENCY MAY NOT CONTRACT, OUTSIDE OF THE CLASSIFICATION ACT, WITH INDIVIDUALS TO SERVE AS MESSENGERS, BUT MAY CONTRACT FOR WESTERN UNION MESSENGER SERVICE WHERE IT CANNOT PERFORM THE WORK BY ITS OWN EMPLOYEES. 17 COMP. GEN. 56, 87. AND YOU HAVE APPROVED PURCHASES OF TABULATING SERVICES (21 COMP. GEN. 400) AND CATALOGING SERVICES (13 COMP. GEN. 351), WHERE THE FUNCTION COULD NOT BE PERFORMED BY REGULAR EMPLOYEES. I SHOULD SUPPOSE, TOO, THAT THERE CAN BE NO DOUBT OF OUR ABILITY TO PURCHASE SUCH SERVICES AS WINDOW-WASHING AND PHOTOSTATING, EVEN THOUGHT WE MIGHT NOT BE ABLE TO HIRE ON A CONTRACT BASIS INDIVIDUALS TO DO WINDOW-WASHING OR PHOTOSTATING. THE DISTINCTION BETWEEN THE PURCHASE OF A SERVICE RENDERED BY A CONTRACTING AGENCY WHICH SUPPLIES ITS OWN STAFF AND EQUIPMENT FACILITIES AND THAT PERFORMED ON A PURELY PERSONAL BASIS IN WHICH THE TIME ELEMENT ONLY IS INVOLVED AND THE WORK IS SUPERVISED BY THE AGENCY IS ALSO ARTICULATED IN 17 COMP. GEN. 300.

2. THIS AGENCY IS CHARGED BY LAW WITH THE RESPONSIBILITY OF ENFORCING THE MAXIMUM PRICES IT ESTABLISHES, AND CONGRESS HAS APPROPRIATED FUNDS TO ENABLE US TO DISCHARGE OUR RESPONSIBILITY. WE CANNOT ENFORCE OUR LUMBER REGULATIONS WITHOUT SUCH SERVICES OTHER THAN BY THE ARRANGEMENT DESCRIBED.

3. AS INDICATED ABOVE, THE OBTAINING OF LUMBER GRADING SERVICES ON A CONTRACT BASIS FROM RESPONSIBLE ORGANIZATIONS IS WELL RECOGNIZED IN GOVERNMENT PRACTICE.

IN VIEW OF THE IMPORTANCE OF THIS QUESTION TO OUR ENFORCEMENT OPERATIONS I SHALL GREATLY APPRECIATE YOUR EARLY RESPONSE.

THE DECISION OF AUGUST 21, 1944, B-43730, 24 COMP. GEN. 147, OF WHICH RECONSIDERATION IS HERE REQUESTED WAS, OF COURSE, BASED UPON THE STATEMENT OF FACTS AND THE PRESENTATION OF THE PROBLEM INVOLVED, APPEARING IN YOUR LETTER OF AUGUST 5, 1944, AND UPON THAT BASIS THE CONCLUSION OF THE DECISION COULD NOT HAVE BEEN OTHERWISE THAN THAT THE INSPECTION OF LUMBER WAS A PERSONAL SERVICE FOR PERFORMANCE BY THE PERSONNEL OF THE OFFICE OF PRICE ADMINISTRATION AND PAYMENT OF COMPENSATION TO THEM IN ACCORDANCE WITH THE CLASSIFICATION ACT, AS AMENDED.

YOUR PRESENT SUBMISSION PLACES AN ENTIRELY DIFFERENT LIGHT ON THE MATTER. UPON THE FACTS NOW PRESENTED--- SHOWING (1) THAT THERE ARE NO QUALIFIED INDIVIDUAL INSPECTORS OF LUMBER AVAILABLE, (2) THAT SUCH INSPECTION IS CONTROLLED ENTIRELY BY AND PERFORMED THROUGH ORGANIZATIONS OR ASSOCIATIONS (3) THAT INSPECTION WORK INVOLVES MORE THAN A PURELY PERSONAL SERVICE INCLUDING, ALSO, LABORATORY SERVICE AND THE USE OF EQUIPMENT, AND (4) THAT THE "PROBATIVE VALUE ATTACHING TO THE ASSOCIATION'S STATUS IN THE INDUSTRY" IS A MATERIAL PART OF THE SERVICE FURNISHED--- THERE IS JUSTIFICATION FOR THE CONCLUSION, AS YOU SUGGEST, UNDER THE RULE STATED IN THE DECISIONS CITED IN YOUR LETTER, THAT PROCUREMENT OF THE SERVICES OF THE SOUTHERN PINE ASSOCIATION, OR OTHER SIMILAR ORGANIZATION, BY CONTRACT, TO FURNISH THE NECESSARY INSPECTION OF LUMBER IN CONNECTION WITH DETERMINING VIOLATION OF CEILING PRICES ON LUMBER--- A DUTY AND RESPONSIBILITY IMPOSED BY LAW ON THE OFFICE OF PRICE ADMINISTRATION--- IS AUTHORIZED.

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