B-152306, DECEMBER 12, 1966, 46 COMP. GEN. 556

B-152306, DECEMBER 12, 1966, 46 COMP. GEN. 556

CONTRACTS - ARCHITECT, ENGINEERING, ETC., SERVICES - FEES - LIMITATIONS ALL TYPES OF CONTRACTS THE 6-PERCENT LIMITATION ON ARCHITECTURAL AND ENGINEERING FEES APPLYING TO BOTH FIXED-PRICE AND COST-PLUS-A-FIXED-FEE CONTRACTS EXECUTED BY THE MILITARY DEPARTMENTS PURSUANT TO THE ACTS OF APRIL 25, 1939, AND AUGUST 7, 1939, AND CODIFIED AT 10 U.S.C. 4540, 7212, AND 9540, THE FACT THAT THE CODIFICATION OF SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 AT 10 U.S.C. 2306 (D) REFERS ONLY TO "COST-PLUS-A-FIXED-FEE CONTRACTS" DOES NOT RESTRICT THE FEE LIMITATION OF THE SECTION TO ONE TYPE OR CLASS OF CONTRACTING, AS SECTION 4 (B) FROM WHICH SECTION 2306 (D) DERIVES WAS INTENDED TO ACCOMPLISH THE SAME LEGISLATIVE PURPOSE AS THE 1939 ACTS AND, THEREFORE, ALL ARCHITECTURAL AND ENGINEERING CONTRACTS EXECUTED BY THE MILITARY DEPARTMENTS REGARDLESS OF TYPE ARE SUBJECT TO A 6 -PERCENT LIMITATION ON FEES. STATUTORY CONSTRUCTION - LEGISLATIVE HISTORY, TITLE, ETC. - ABSENCE OF AMBIGUITY UNDER THE "PLAIN MEANING" RULE OF STATUTORY CONSTRUCTION, ALTHOUGH IN THE ABSENCE OF AMBIGUITY IN A STATUTORY PROVISION, THE EXAMINATION OF PRIOR STATUTES IS PRECLUDED, WHEN A LITERAL INTERPRETATION OF AN UNAMBIGUOUS STATUTE LEADS TO AN UNREASONABLE, UNJUST, OR IMPRACTICABLE RESULT, THE LEGISLATIVE HISTORY OF THE STATUTE MAY BE EXAMINED. AS THE 6-PERCENT FEE LIMITATION IN 10 U.S.C. 2306 (D), RESTRICTED TO COST-PLUS A-FIXED-FEE ARCHITECTURAL AND ENGINEERING CONTRACTS COULD BE AVOIDED BY CONTRACTING ON A FIXED-PRICE BASIS, RESORT TO THE LEGISLATIVE HISTORY OF SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, CODIFIED IN SECTION 2306 (D), IS PERMITTED, AND SECTION 4 (B) INTENDED TO ACCOMPLISH THE SAME PURPOSE AS THE ACTS OF APRIL 25, 1939 AND AUGUST 7, 1939, IMPOSING A 6-PERCENT FEE LIMITATION ON ALL ARCHITECTURAL AND ENGINEERING CONTRACTS, THE OMISSION OF REFERENCE TO FIXED-PRICE CONTRACTS IN SECTION 2306 (D) IS CONSIDERED AN INADVERTENT ERROR AND, THEREFORE, THE FEE LIMITATION IS NOT RESTRICTED TO COST-PLUS-A-FIXED FEE CONTRACTS. CONTRACTS - ARCHITECT, ENGINEERING, ETC., SERVICES - FEES - LIMITATIONS - COMPUTATION ALTHOUGH THE EXCLUSION OF CERTAIN COSTS THAT DO NOT RELATE TO THE FURNISHING OF DESIGNS, PLANS, DRAWINGS, ETC., HAS BEEN PERMITTED IN THE COMPUTATION OF THE 6-PERCENT FEE LIMITATION IMPOSED BY THE ACTS OF APRIL 25, 1939 AND AUGUST 7, 1939, ON ARCHITECTURAL AND ENGINEERING CONTRACTS, THERE IS NO JUSTIFICATION FOR EXCLUDING SUCH COSTS FROM THE OPERATION OF THE FEE LIMITATION PRESCRIBED BY 10 U.S.C. 2306 (D), IN VIEW OF THE FACT THAT SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, CODIFIED IN 10 U.S.C. 2306 (D), FIXES THE MAXIMUM FEE PAYABLE, WHEREAS THE 1939 STATUTES RELATE TO THE COST OF THE PROFESSIONAL SERVICES INVOLVED IN FURNISHING DESIGNS, PLANS, ETC. HOWEVER, WHILE SECTION 2306 (D) PERMITS NO EXCLUSION OF COSTS FROM THE APPLICATION OF THE 6-PERCENT FEE LIMITATION, NO ACTION WILL BE TAKEN ON THE EXCLUSION OF COSTS PENDING CONCLUSION OF THE GOVERNMENT-WIDE REVIEW OF ARCHITECT-ENGINEER CONTRACTING PROCEDURES. CONTRACTS - ARCHITECT, ENGINEERING, ETC., SERVICES - NEGOTIATION AUTHORITY THE ARCHITECTURAL AND ENGINEERING CONTRACTS AUTHORIZED BY THE ACTS OF APRIL 25, 1939 AND AUGUST 7, 1939, CODIFIED AT 10 U.S.C. 4540, 7212, AND 9540, ARE FOR NEGOTIATION UNDER 10 U.S.C. 2304 (A) (17) AS "OTHERWISE AUTHORIZED BY LAW," UPON DETERMINATION, IN ACCORDANCE WITH THE 1939 STATUTES, THAT THE PROCUREMENT IS ADVANTAGEOUS TO THE NATIONAL DEFENSE AND THAT THE EXISTING MILITARY FACILITIES ARE INADEQUATE, AS THE NEGOTIATION AUTHORITY IN 10 U.S.C. 2304 (A) (4), WHICH RELATES TO PERSONAL OR PROFESSIONAL SERVICES, IS LIMITED TO SITUATIONS WHERE NO OTHER EXEMPTION IS AVAILABLE, AND THE PERMISSIVE EXCLUSIONS OF COSTS FROM THE FEE LIMITATION IMPOSED ON ARCHITECTURAL AND ENGINEERING CONTRACTS MAY BE REFLECTED IN THE CONTRACTS NEGOTIATED UNDER THE 1939 ACTS, BUT NOT IN THE CONTRACTS NEGOTIATED UNDER 10 U.S.C. 2304 (A) (4) AND SUBJECT TO THE FEE LIMITATION OF 10 U.S.C. 2306 (D). CONTRACTS - ARCHITECT, ENGINEERING, ETC., SERVICES - CONTRACTOR SELECTION BASE THE LONGSTANDING ADMINISTRATIVE PRACTICE OF SELECTING ARCHITECT AND ENGINEER CONTRACTORS ON THE BASIS OF ABILITY AS THE STANDARDS OF PROFESSIONAL PRACTICE DO NOT PERMIT THE PRICE COMPETITION CONTEMPLATED BY THE NEGOTIATION AUTHORITY IN 10 U.S.C. 2304 (G), WILL NOT BE QUESTIONED, BUT THE CONGRESS WILL BE INFORMED OF THE PRACTICE IN THE REPORT ON THE GOVERNMENT-WIDE REVIEW OF THE INTERPRETATIONS AND APPLICATIONS OF THE STATUTORY 6-PERCENT FEE LIMITATION IMPOSED ON ARCHITECT-ENGINEER CONTRACTS, WITH RECOGNITION GIVEN IN THE REPORT TO THE FACT THAT THE COST OR PRICING AND THE CERTIFICATION REQUIREMENTS OF 10 U.S.C. 2306 (B) ARE BEING FOLLOWED.

TO THE SECRETARY OF DEFENSE, DECEMBER 12, 1966:

BY LETTER DATED NOVEMBER 5, 1966, THE ASSISTANT SECRETARY OF DEFENSE(INSTALLATIONS AND LOGISTICS) FURNISHED US WITH REPLIES TO CERTAIN QUESTIONS WHICH WE RAISED IN A LETTER DATED SEPTEMBER 9, 1966, WITH REFERENCE TO OUR CURRENT GOVERNMENT-WIDE STUDY ON THE APPLICATIONS AND INTERPRETATIONS OF THE FEE LIMITATIONS IMPOSED BY FOUR STATUTES CODIFIED IN TITLE 10 OF THE UNITED STATES CODE.

IN OUR LETTER OF SEPTEMBER 9 WE ASKED THE FOLLOWING FIVE QUESTIONS:

1. WHETHER THE 6-PERCENT FEE LIMITATIONS IMPOSED BY THE VARIOUS STATUTES ON THE THREE MILITARY DEPARTMENTS ARE APPLICABLE TO BOTH FIXED-PRICE AND COST-TYPE CONTRACTS. IN THIS CONNECTION WE HELD IN DECISION 46 COMP. GEN. 183 THAT THE FEE LIMITATION IN 41 U.S.C. 254 (B) SHOULD NOT BE ADMINISTRATIVELY RESTRICTED TO COST-TYPE CONTRACTING ONLY.

2. WHAT IS THE LEGAL BASIS FOR EXCLUDING CERTAIN CONTRACT COSTS IN APPLYING THE VARIOUS STATUTORY FEE LIMITATIONS? WE HAVE TAKEN THE POSITION THAT ALL COSTS--- WITHOUT EXCEPTION--- INCURRED IN RENDERING ARCHITECTURAL OR ENGINEERING SERVICES IN CONNECTION WITH PUBLIC WORKS PROJECTS ARE TECHNICALLY SUBJECT TO THE STATUTORY 6-PERCENT FEE LIMITATION IMPOSED BY 41 U.S.C. 254 (B).

3. UNDER WHAT CIRCUMSTANCES IS THE AUTHORITY IN 10 U.S.C. 2304 (A) (4); ID. 2304 (A) (17); 4540; 7212; AND 9540 INVOLVED IN NEGOTIATING ARCHITECT- ENGINEER CONTRACTS?

4. WHAT IS THE JUSTIFICATION FOR NEGOTIATING CONTRACTS UNDER 10 U.S.C. 4540; 7212; AND 9540 IN VIEW OF THE BROAD AUTHORITY OF 10U.S.C. 2304 (A) (4/? IS THE ARCHITECT-ENGINEER CONTRACT ENTERED INTO BY A PARTICULAR MILITARY DEPARTMENT CONSIDERED TO BE SUBJECT TO 10 U.S.C. 2306 (D) OR TO THE LIMITATION IN THE ABOVE-REFERENCE SECTIONS?

5. ARE ARCHITECT-ENGINEER CONTRACTS NEGOTIATED IN ACCORDANCE WITH 10 U.S.C. 2304 (G) AND 2306 (F) AS IMPLEMENTED BY THE PERTINENT PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION? IF THE REQUIREMENTS OF THESE SECTIONS ARE NOT CONSIDERED TO BE APPLICABLE IN THE NEGOTIATION OF ARCHITECT-ENGINEER CONTRACTS PLEASE EXPLAIN THE BASIS OF SUCH POSITION.

THE RESPONSES OF THE ASSISTANT SECRETARY TO THESE QUESTIONS WERE AS FOLLOWS:

1. THE SIX PERCENT FEE LIMITATION APPLIES TO ALL ARCHITECT-ENGINEER CONTRACTS. 10 U.S.C. 2306 (D) APPLIES TO COST-PLUS-FIXED-FEE CONTRACTS; 10 U.S.C. 4540, 7212 AND 9540 APPLY TO FIXED-PRICE AND COST TYPE CONTRACTS.

2. IN ACCORDANCE WITH THE ABOVE STATUTORY PROVISIONS, COSTS INCURRED IN THE PRODUCTION AND DELIVERY OF DESIGNS, PLANS, DRAWINGS AND SPECIFICATIONS ARE CONSIDERED TO BE SUBJECT TO THE 6 PERCENT FEE LIMITATION. HOWEVER, IT IS UNDERSTOOD THAT CERTAIN COSTS NEED NOT BE TREATED AS BEING WITHIN THE 6 PERCENT FEE LIMITATION. THESE INCLUDE, FOR EXAMPLE, REIMBURSEMENT OF TRAVEL EXPENSES, EXPENDITURES FOR EXPERT TECHNICAL ASSISTANCE AND AMOUNTS REPRESENTING PAYMENTS FOR TECHNICAL SUPERVISION OF THE CONSTRUCTION WORK. SEE 21 COMP. GEN. 580; 22 COMP. GEN. 464. IN ADDITION, WE HAVE CONSIDERED THAT CERTAIN PRELIMINARY COSTS SUCH AS FIELD SURVEYS AND INVESTIGATIONS ARE NOT SUBJECT TO THE SIX PERCENT LIMITATION.

3. AND 4. BOTH THE ARMY AND THE AIR FORCE UTILIZE THE AUTHORITY OF 10 U.S.C. 2304 (A) (4) TO NEGOTIATE DOMESTIC ARCHITECT-ENGINEER CONTRACTS. AS YOU ARE AWARE, 10 U.S.C. 7212, APPLYING ONLY TO THE NAVY, PROVIDES FOR CONTRACTS "WITHOUT ADVERTISING.' THEREFORE, SINCE THE USE OF 10 U.S.C. 2304 (A) (4) IS LIMITED BY THE ARMED SERVICES PROCUREMENT REGULATION TO SITUATIONS IN WHICH NO OTHER NEGOTIATION EXCEPTION IS AVAILABLE, NAVY ARCHITECT-ENGINEER CONTRACTS CITE 10 U.S.C. 2304 (A) (17) AS NEGOTIATION "OTHERWISE AUTHORIZED BY LAW.'

IT IS CONSIDERED THAT 10 U.S.C. 2306 (D) APPLIES TO COST-PLUS-FIXED FEE CONTRACTS ONLY. THE FEE LIMITATIONS OF 10 U.S.C. 4540, 7212 AND 9540 APPLY TO BOTH FIXED-PRICE AND COST-TYPE CONTRACTS AND, WHETHER OR NOT USED AS AUTHORITY TO NEGOTIATE, THE FEE LIMITATIONS THEREIN ARE CONSIDERED APPLICABLE TO ALL ARCHITECT-ENGINEER CONTRACTS.

5. CONCERNING THE REQUIREMENT OF 10 U.S.C. 2304 (G) FOR COMPETITION, THE PROVISIONS OF SECTION XVIII OF THE ARMED SERVICES PROCUREMENT REGULATION ARE FOLLOWED WITH RESPECT TO THE SOLICITATIONS AND AWARD OF ARCHITECT- ENGINEER CONTRACTS. SINCE THE STANDARDS OF PROFESSIONAL PRACTICE FOR ARCHITECTS AND ENGINEERS DO NOT PERMIT THEM TO COMPETE FOR CONTRACTS ON A PRICE BASIS, THE SELECTION OF A CONTRACTOR IS BASED ON TECHNICAL ABILITY. AS SET FORTH IN ASPR 18 402.2, A MINIMUM OF THREE FIRMS ARE SELECTED. NEGOTIATIONS ARE THEN CONDUCTED WITH THE FIRST-SELECTED FIRM. IN THE EVENT THAT A FAIR AND REASONABLE PRICE NOT IN EXCESS OF THE GOVERNMENT ESTIMATE CANNOT BE OBTAINED, NEGOTIATIONS ARE THEN CONDUCTED WITH THE FIRM NEXT IN ORDER OF PREFERENCE. SEE ASPR 18-306.2. WE BELIEVE THAT THIS PROCEDURE REQUIRES THE MAXIMUM COMPETITION CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SERVICES BEING PROCURED. WITH RESPECT TO 10 U.S.C. 2306 (F), THE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION ARE FOLLOWED IN THAT COST OR PRICING DATA TOGETHER WITH THE APPROPRIATE CERTIFICATE IS OBTAINED AS REQUIRED UNDER ASPR 3-807.3.

THE CONCEPT OF LIMITING TO 6 PERCENT THE FEE PAYABLE TO ARCHITECT ENGINEERS WAS DERIVED FROM PUBLIC LAW 43, APPROVED APRIL 25, 1939, AND PUBLIC LAW 309, APPROVED AUGUST 7, 1939. SECTIONS 3 AND 2 OF PUBLIC LAWS 43 AND 309, RESPECTIVELY, PROVIDED:

SEC. 3. WHENEVER DEEMED BY HIM TO BE ADVANTAGEOUS TO THE NATIONAL DEFENSE, AND PROVIDING THAT IN THE OPINION OF THE SECRETARY OF THE NAVY THE EXISTING FACILITIES OF THE NAVAL ESTABLISHMENT ARE INADEQUATE, THE SECRETARY OF THE NAVY IS HEREBY AUTHORIZED TO EMPLOY, BY CONTRACT OR OTHERWISE, OUTSIDE ARCHITECTURAL OR ENGINEERING CORPORATIONS, FIRMS, OR INDIVIDUALS FOR THE PRODUCTION AND DELIVERY OF THE DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS REQUIRED FOR THE ACCOMPLISHMENT OF ANY NAVAL PUBLIC WORKS OR UTILITIES PROJECT OR THE CONSTRUCTION OF ANY NAVAL VESSEL, AIRCRAFT, OR PART THEREOF, WITHOUT REFERENCE TO THE CLASSIFICATION ACT OF 1923 (42 STAT. 1488), AS AMENDED (5 U.S.C. CH. 13), OR TO SECTION 3709 OF THE REVISED STATUTES OF THE UNITED STATES (41 U.S.C. 5). IN NO CASE SHALL THE FEE PAID FOR ANY SERVICE AUTHORIZED BY THIS SECTION EXCEED 6 PER CENTUM OF THE ESTIMATED COST, AS DETERMINED BY THE SECRETARY OF THE NAVY, OF THE PROJECT TO WHICH SUCH FEE IS APPLICABLE.

SEC. 2. WHENEVER DEEMED BY HIM TO BE ADVANTAGEOUS TO THE NATIONAL DEFENSE, AND PROVIDING THAT IN THE OPINION OF THE SECRETARY OF WAR THE EXISTING FACILITIES OF THE WAR DEPARTMENT ARE INADEQUATE, THE SECRETARY OF WAR IS HEREBY AUTHORIZED TO EMPLOY, BY CONTRACT OR OTHERWISE, OUTSIDE ARCHITECTURAL OR ENGINEERING CORPORATIONS, FIRMS, OR INDIVIDUALS FOR THE PRODUCTION AND DELIVERY OF THE DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS REQUIRED FOR THE ACCOMPLISHMENT OF ANY PUBLIC WORKS OR UTILITIES PROJECT OF THE WAR DEPARTMENT WITHOUT REFERENCE TO THE CLASSIFICATION ACT OF 1923 (42 STAT. 1488), AS AMENDED (5 U.S.C. CH. 13), OR TO SECTION 3709 OF THE REVISED STATUTES OF THE UNITED STATES (41 U.S.C. 5). IN NO CASE SHALL THE FEE PAID FOR ANY SERVICE AUTHORIZED BY THIS SECTION EXCEED 6 PER CENTUM OF THE ESTIMATED COST, AS DETERMINED BY THE SECRETARY OF WAR, OF THE PROJECT TO WHICH SUCH FEE IS APPLICABLE.

THE TWO STATUTES ARE SUBSTANTIALLY SIMILAR; HOWEVER, SECTION 3 APPLIED NOT ONLY TO PUBLIC WORKS OR UTILITIES BUT ALSO TO THE CONSTRUCTION OF ANY NAVAL VESSEL, AIRCRAFT OR PART THEREOF, WHEREAS, SECTION 2 WAS APPLICABLE TO ONLY PUBLIC WORKS OR UTILITIES PROJECTS. THESE TWO STATUTES WERE CODIFIED BY THE ACT OF AUGUST 10, 1956, AS 10 U.S.C. 7212 AND 4540, AND THE CORRESPONDING PROVISION FOR THE AIR FORCE, DERIVED FROM SECTION 2, SUPRA, IS CODIFIED AT 10 U.S.C. 9540. BOTH THE ORIGINAL STATUTES AND THE CODIFICATIONS REFER TO CONTRACTS FOR "PRODUCING AND DELIVERING DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS.' IN 21 COMP. GEN. 580, WE CONSIDERED THE LEGAL EFFECT OF THE 6-PERCENT FEE LIMITATION IN SECTION 2, SUPRA, ON A COST-PLUS-A FIXED-FEE CONTRACT FOR ARCHITECT-ENGINEER SERVICES AND STATED AT PAGES 586-587:

SUMMARIZING, I FIND NOTHING IN THE ACT OF AUGUST 7, 1939, OR IN THE LEGISLATIVE HISTORY OF THAT ACT, OR IN THE GENERAL PRACTICE OBTAINING WITH RESPECT TO GOVERNMENT OR PRIVATE CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES WHICH SERVES TO ESTABLISH THAT THE SIX-PERCENT LIMITATION IMPOSED ON THE FEES PAYABLE UNDER CONTRACTS AUTHORIZED BY SECTION 2 OF THE ACT WAS INTENDED TO RELATE TO FIXED FEES UNDER COST PLUS- A-FIXED-FEE CONTRACTS. ON THE CONTRARY, AN EXAMINATION OF EACH OF THE FACTORS WHICH IT IS PERMISSIBLE TO CONSIDER IN AID OF STATUTORY CONSTRUCTION DISCLOSES MANY INDICATIONS THAT THE CONGRESS, IN IMPOSING THE LIMITATION, CONTEMPLATED THAT THE FEE WHICH WAS LIMITED TO SIX PERCENT SHOULD INCLUDE EVERYTHING ORDINARILY COVERED BY THE FEE IN PERCENTAGE-FEE CONTRACTS FOR SERVICES OF THE TYPE HERE INVOLVED.

OUR DECISION AT 22 COMP. GEN. 464, 466, AMPLIFIED THE ABOVE DECISION AND HELD:

* * * IN OTHER WORDS, WHERE CONTRACTS COVER BOTH THE PREPARATION AND DELIVERY OF DESIGNS, PLANS, ETC., AND THE FURNISHING OF SUPERVISORY SERVICES, THE PROVISION IN THE ACT OF AUGUST 7, 1939, LIMITING FEES OF ARCHITECT-ENGINEERS TO 6 PERCENT OF THE ESTIMATED COST OF THE PROJECT INVOLVED, APPLIES TO THAT PART OF SAID CONTRACTS WHICH COVERS THE "PRODUCTION AND DELIVERY OF THE DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS.' ACCORDINGLY, IN DETERMINING WHETHER THE STATUTORY LIMITATION HAS BEEN EXCEEDED THERE NEED BE CONSIDERED ONLY THE QUESTION AS TO WHETHER THE TOTAL OF THE AMOUNTS PAID TO THE CONTRACTORS AS REIMBURSEMENT OF EXPENSES AND AS FEES FOR THE PREPARATION AND DELIVERY OF DESIGNS, ETC., EXCEEDS 6 PERCENT OF THE ESTIMATED COST OF THE ROJECT; AND THERE NEED NOT BE INCLUDED IN THE COMPUTATION ANY AMOUNTS PAID TO THE CONTRACTOR AS REIMBURSEMENT OF EXPENSES OR AS COMPENSATION FOR TECHNICAL SUPERVISION OF THE WORK.

WE THEREFORE AGREE THAT THE CODIFICATIONS OF THE 1939 STATUTES APPLY TO ALL TYPES OF CONTRACTS AND THAT COSTS WHICH DO NOT RELATE TO THE PREPARATION OF DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS MAY BE REGARDED AS NOT SUBJECT TO THE 6-PERCENT LIMITATION IMPOSED BY THOSE STATUTES.

HOWEVER, WE DO NOT AGREE THAT THE CODIFICATION AT 10 U.S.C. 2306 (D) APPLIES ONLY TO COST-PLUS-A-FIXED-FEE CONTRACTS. SECTION 2306 (D) PROVIDES, IN PERTINENT PART, THAT "THE FEE FOR PERFORMING A COST-PLUS A- FIXED-FEE CONTRACT FOR ARCHITECTURAL OR ENGINEERING SERVICES FOR A PUBLIC WORK OR UTILITY PLUS THE COST OF THOSE SERVICES TO THE CONTRACTOR MAY NOT BE MORE THAN 6 PERCENT OF THE ESTIMATED COST OF THAT WORK OR PROJECT, NOT INCLUDING FEES.'

THE FOREGOING IS A CODIFICATION OF A PORTION OF SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 WHICH READS:

* * * AND THAT A FEE INCLUSIVE OF THE CONTRACTOR'S COSTS AND NOT IN EXCESS OF 6 PER CENTUM OF THE ESTIMATED COST, EXCLUSIVE OF FEES, AS DETERMINED BY THE AGENCY HEAD AT THE TIME OF ENTERING INTO THE CONTRACT, OF THE PROJECT TO WHICH SUCH FEE IS APPLICABLE IS AUTHORIZED IN CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES RELATING TO ANY PUBLIC WORKS OR UTILITY PROJECT). * * *

PUBLIC LAW 1028, 84TH CONG., 2D SESS., APPROVED AUGUST 10, 1956, 70A STAT. 1-685, REVISED, CODIFIED AND ENACTED INTO LAW TITLE 10 OF THEU.S. CODE, ENTITLED "ARMED FORCES.' SECTION 53 OF THAT LAW, 70A STAT. 641, SPECIFICALLY REPEALED SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, BUT IT WAS PROVIDED IN SECTION 49 (A) THEREOF, 70A STAT. 640, THAT:

* * * IT IS THE LEGISLATIVE PURPOSE TO RESTATE, WITHOUT SUBSTANTIVE CHANGE, THE LAW REPLACED BY THOSE SECTIONS ON THE EFFECTIVE DATE OF THIS ACT. * * *

S. REPT. NO. 2484, 84TH CONG., 2D SESS., ON H.R. 7049--- WHICH WAS ENACTED AS PUBLIC LAW 1028--- CONTAINS AN EXPLANATION OF THIS PROVISION ON PAGES 19-21: 5. RESTATEMENT OF SUBSTANCE

THE OBJECT OF THE NEW TITLES HAS BEEN TO RESTATE EXISTING LAW, NOT TO MAKE NEW LAW. CONSISTENTLY WITH THE GENERAL PLAN OF THE UNITED STATES CODE, THE PERTINENT PROVISIONS OF LAW HAVE BEEN FREELY REWORDED AND REARRANGED, SUBJECT TO EVERY PRECAUTION AGAINST DISTURBING EXISTING RIGHTS, PRIVILEGES, DUTIES, OR FUNCTIONS. ADHERENCE TO THE SUBSTANCE OF EXISTING LAW, HOWEVER, HAS NOT ALWAYS MEANT ADHERENCE TO THE LETTER OF THE STATUTE. WHERE COURT DECISIONS, OPINIONS OF OFFICIALS SUCH AS THE ATTORNEY GENERAL OR THE COMPTROLLER GENERAL, EXECUTIVE ORDERS, REGULATIONS, OR WELL-ESTABLISHED ADMINISTRATIVE PRACTICE HAVE ESTABLISHED AUTHORITATIVE INTERPRETATIONS CLARIFYING AMBIGUITIES IN THE LAW, THE TEXT HAS BEEN REWORDED TO EXPRESS THOSE INTERPRETATIONS. THESE CHANGES HAVE BEEN EXPLAINED IN THE APPLICABLE REVISION NOTES. 6. REVISION OF LANGUAGE: STYLE

CODIFICATION INVOLVES THE A PARENT PARADOX THAT LAWS MUST BE CHANGED IN FORM THAT THEY MAY REMAIN UNCHANGED IN SUBTANCE. NOT TO REWORD THE STATUTES THAT ARE BEING CONSOLIDATED WOULD RESULT IN OBSCURITY, AMBIGUITY, PROLIXITY, AND INCONSISTENCY. PROBLEMS OF CONSTRUCTION THAT DO NOT EXIST WHEN INCONSISTENCIES IN LANGUAGE APPEAR IN INDEPENDENT ENACTMENTS NECESSARILY ARISE WHEN THEY ARE JUXTAPOSED IN A SINGLE REENACTMENT. * * *

IT IS SOMETIMES FEARED THAT MERE CHANGES IN TERMINOLOGY AND STYLE WILL RESULT IN CHANGES IN SUBSTANCE OR IMPAIR THE PRECEDENT VALUE OF EARLIER JUDICIAL DECISIONS AND OTHER INTERPRETATIONS. THIS FEAR MIGHT HAVE SOME WEIGHT WERE THIS THE USUAL KIND OF AMENDATORY LEGISLATION, WHERE IT CAN BE INFERRED THAT A CHANGE IN LANGUAGE IS INTENDED TO CHANGE SUBSTANCE. IN A CODIFICATION STATUTE, HOWEVER, THE COURTS UPHOLD THE CONTRARY PRESUMPTION: THE LAW IS INTENDED TO REMAIN SUBSTANTIVELY UNCHANGED. * * *

THE PRESUMPTION THAT THE SUBSTANCE OF THE LAW IS INTENDED TO REMAIN UNCHANGED IS STRONGLY BUTTRESSED BY THE INCLUSION OF SECTION 49 (A), PROVIDING THAT "IN SECTONS 1-48 OF THIS ACT, IT IS THE LEGISLATIVE PURPOSE TO RESTATE, WITHOUT SUBSTANTIVE CHANGE, THE LAW REPLACED BY THOSE SECTIONS ON THE EFFECTIVE DATE OF THIS ACT.'

IT IS THUS IMPERATIVE TO CONSIDER THE INTENT AND MEANING OF SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 SINCE THE LEGAL EFFECT OF THIS SECTION WOULD GOVERN, IN LARGE MEASURE, THE INTERPRETATION OF 10 U.S.C. 2306 (D) FROM WHICH IT WAS DERIVED.

THE FEE LIMITATION IN SECTION 4 (B) IS COUCHED IN LANGUAGE INDICATIVE OF AN INTENTION TO ACCOMPLISH THE SAME LEGISLATIVE PURPOSE OF THE 1939 STATUTES. THE 1939 STATUTORY LIMITATION BROADLY APPLIES "TO CONTRACTS FOR ARCHITECT-ENGINEER SERVICES" WITHOUT ANY REFERENCE TO, OR ANY INDICATION OF, AN INTENTION TO RESTRICT ITS APPLICATIONS TO A SPECIFIC TYPE OF CONTRACTING. THIS IS REASONABLY SUPPORTED BY THE FACT THAT COST-PLUS-A- FIXED-FEE TYPE OF CONTRACTING WAS NOT GENERALLY USED UNTIL AUTHORIZED BY THE ACT OF JUNE 28, 1940, 54 STAT. 676, 677. HENCE, IT MAY BE SAID THAT THE CONGRESS WAS NOT LEGISLATING SOLELY IN THE AREA OF COST-PLUS-A-FIXED- FEE CONTRACTING. MOREOVER, THE 1947 FEE LIMITATION, LIKE THE 1939 FEE LIMITATIONS, IS ONE ON THE TOTAL COMPENSATION OF AN ARCHITECT-ENGINEER AS DISTINGUISHED FROM THE OTHER "FIXED" FEE OR PROFIT LIMITATIONS IMPOSED BY THE 1947 STATUTE.

WE RCOGNIZE THAT THE LEGISLATIVE HISTORY REFERENCES QUOTED IN OUR DECISION OF AUGUST 31, 1966, 46 COMP. GEN. 183, TO THE ADMINISTRATOR OF VETERANS AFFAIRS, MIGHT SUPPORT THE POSITION OF YOUR DEPARTMENT IN THE MATTER. HOWEVER, WE BELIEVE IT MORE REASONABLE TO IMPUTE TO THE CONGRESS AN INTENTION TO FIX A LIMITATION ON FEES PAYABLE TO ARCHITECT ENGINEERS REGARDLESS OF WHETHER THEY BE "FIXED FEES" FOR DETERMINING PROFIT OR FEES MEASURING THE TOTAL COMPENSATION, HOWEVER COMPUTED UNDER CONTRACT, PAYABLE TO PROFESSIONAL ARCHITECTS OR ENGINEERS.

THERE REMAINS, HOWEVER, FOR CONSIDERATION THE WEIGHT TO BE GIVEN TO THE LANGUAGE USED IN THE CODIFICATION AT 10 U.S.C. 2306 (D) WHICH REFERS ONLY TO THE "FEE FOR PERFORMING A COST-PLUS-A-FIXED-FEE CONTRACT FOR ARCHITECTURAL OR ENGINEERING SERVICES.'

AS STATED ABOVE, SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 WAS CODIFIED BY THE ACT OF AUGUST 10, 1956, PUBLIC LAW 1028. WHILE THE HISTORICAL AND REVISION NOTES TO 10 U.S.C. 2306 REFERENCE SECTION 4 OF THE 1947 STATUTE AS THE SOURCE STATUTE, THEY DO NOT INDICATE THE LEGISLATIVE PURPOSE AND INTENT OF THE LANGUAGE CHANGES OF THE CODIFICATION. HOWEVER, BOTH THE SENATE AND HOUSE REPORTS ON THE CODIFICATION LEGISLATION STATE: "FOR EACH SECTION OF THE NEW TITLES A REVISION NOTE HAS BEEN WRITTEN SHOWING THE SOURCE LAW AND EXPLAINING SIGNIFICANT CHANGES AND OMISSIONS.' IT THEREFORE IS REASONABLE TO CONCLUDE THAT NO CHANGE IN MEANING WAS INTENDED BY THE CONGRESS FROM THE SCOPE OF THE 1947 ACT. SEE, ALSO, PAGES 19-21 OF S. REPT. NO. 2484, REFERRED TO ABOVE, WHERE IT IS STATED THAT "THESE CHANGES HAVE BEEN EXPLAINED IN THE APPLICABLE REVISION NOTES.'

IN THE FOREGOING REGARD, THE COURTS WILL PRESUME THAT A CHANGE IN PHRASEOLOGY OR THE ADDITION OR OMISSION OF WORDS WAS NOT INTENDED TO CHANGE THE MEANING OF A PARTICULAR STATUTE UNLESS A CONTRARY INTENT IS CLEARLY EXPRESSED. 82 C.J.S., STATUTES, SECTION 276 (B); SUTHERLAND (HORACK, 3D ED.), STATUTORY CONSTRUCTION, SECTION 3709. MOREOVER, IT HAS BEEN JUDICIALLY RECOGNIZED THAT, IN PROPER CASES, IT IS PERMISSIBLE TO SUPPLY OMITTED WORDS IN LEGISLATION IF TO DO SO WOULD AVOID ABSURD OR UNINTENDED RESULTS. 50 AM. JUR., STATUTES, SECTIONS 234 AND 447; SUTHERLAND (HORACK, 3D ED.), STATUTORY CONSTRUCTION, SECTION 4924, ET SEQ.

WE ARE AWARE OF THE RULES OF STATUTORY CONSTRUCTION WHICH PRECLUDE RESORT TO LEGISLATIVE HISTORY OF STATUTES IN THE ABSENCE OF EMBIGUITY. THIS "PLAIN MEANING" RULE OF CONSTRUCTION WAS APPLIED IN EARLY SUPREME COURT DECISIONS DEALING WITH REVISIONS AND CODIFICATIONS TO PRECLUDE EXAMINATION OF PRIOR STATUTES TO DETERMINE WHETHER ERRORS OF OMISSION, ETC., HAD BEEN MADE. UNITED STATES V. BOWEN, 100 U.S. 508; CAMBRIA IRON COMPANY V. ASHBURN, 118 U.S. 54; UNITED STATES V. LACHER, 134 U.S. 624. BUT MORE RECENT DECISIONS MAKE IT CLEAR THAT, IN ADDITION TO CONSIDERING THE EXPRESS LANGUAGE OF A STATUTE, IT IS PROPER TO ALSO CONSIDER THE ORIGINAL STATUTE AS WELL AS CONTEMPORANEOUS LEGISLATION ON THE SAME SUBJECT. ASSOCIATION OF WESTINGHOUSE SALARIED EMPLOYEES V. WESTINGHOUSE ELECTRIC CORP., 348 U.S. 437; PUERTO RICO V. SHELL CO., 302 U.S. 253, 258; HARRISON V. NORTHERN TRUST CO., 317 U.S. 476, 479; DISTRICT OF COLUMBIA V. MURPHY, 314 U.S. 441, 449. IT ALSO HAS BEEN SAID THAT WHEN THE NATURAL SIGNIFICANCE OF THE WORDS USED IN A STATUTE WOULD PRODUCE AN UNREASONABLE RESULT, IT IS NOT ONLY PROPER, BUT NECESSARY, TO EXAMINE THE LEGISLATIVE HISTORY OF THE ENACTMENTS. OZAWA V. UNITED STATES, 260 U.S. 178, 194.

ALTHOUGH IT CANNOT BE SAID THAT THE LANGUAGE OF 10 U.S.C. 2306 (D) IS AMBIGUOUS, THERE IS AUTHORITY FOR CONCLUDING "AMBIGUITY" WHEN A LITERAL INTERPRETATION OF THE STATUTE WOULD LEAD TO AN UNREASONABLE, UNJUST, OR IMPRACTICABLE RESULT SUCH AS WOULD COMPEL THE BELIEF THAT THE CONGRESS DID NOT INTEND SUCH RESULT. 82 C.J.S., STATUTES, SECTION 322B (3); 50 AM. JUR., STATUTES, SECTION 226. CF. GLENN V. UNITED STATES, 129 F.SUPP. 914, 920, REVERSED ON OTHER GROUNDS 231 F.2D 884, CERTIORARI DENIED 352 U.S. 926.

TURNING NOW TO THE CODIFICATION OF SECTION 4 (B) OF THE 1947 ACT, IT IS QUITE APPARENT THAT FIXED-PRICE ARCHITECT-ENGINEER CONTRACTS ARE NOT MENTIONED AS SUBJECT TO THE 6-PERCENT FEE LIMITATION. IT IS EQUALLY APPARENT THAT TO GIVE EFFECT TO SUCH SILENCE COULD PRODUCE AN ABSURD RESULT SINCE, UNDER THE LANGUAGE OF THE CODIFICATION, THE FEE LIMITATION COULD BE AVOIDED BY CONTRACTING ON A FIXED-PRICE BASIS. IT THEREFORE WOULD SEEM TO FOLLOW THAT THE APPARENT EXCLUSION OF FIXED PRICE CONTRACTS FROM THE FEE LIMITATION RESULTED FROM INADVERTENT ERROR SINCE, AS WE STATED ABOVE, THERE WAS NO LEGISLATIVE INTENT TO CHANGE THE LAW. IN THAT CONNECTION, WE THINK THERE CAN BE NO DOUBT THAT SECTION 4 (B) OF THE 1947 ACT APPLIED TO ALL ARCHITECT-ENGINEER CONTRACTS REGARDLESS OF TYPE. SEE B -152306, CITED ABOVE. ASPR 18 306.2 (B) RESTRICTS THE FEE OF FIXED-PRICE ARCHITECT-ENGINEER CONTRACTS TO 6 PERCENT OF THE ESTIMATED CONSTRUCTION COST OF THE PROJECT TO WHICH SUCH ARCHITECT-ENGINEER SERVICES APPLY. ALSO COMPARE ASPR 3-405.5 (C) (2) WHICH REFERS TO "CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES" NOT TO COST-PLUS-A-FIXED-FEE CONTRACTS FOR SUCH SERVICES.

IT IS THEREFORE OUR VIEW THAT THE FEE LIMITATIONS OF 10 U.S.C. 2306 (D) SHOULD NOT BE CONSIDERED AS LEGALLY RESTRICTED TO ONE TYPE OR CLASS OF CONTRACTING.

THERE IS NEXT FOR CONSIDERATION THE REPLY OF THE ASSISTANT SECRETARY TO OUR SECOND QUERY; THAT IS, THE LEGAL BASIS FOR EXCLUDING CERTAIN CONTRACT COSTS IN APPLYING THE 6-PERCENT FEE LIMITATION. IT IS STATED IN THE NOVEMBER 5 RESPONSE THAT CERTAIN COSTS, EXEMPLIFIED BY SPECIFIC CATEGORIES OF COSTS, NEED NOT BE TREATED AS BEING WITHIN THE STATUTORY FEE LIMITATION, CITING IN SUPPORT THEREOF OUR DECISIONS AT 21 COMP. GEN. 580, AND 22 ID. 464. ADDITIONALLY, IT IS POINTED OUT THAT CERTAIN PRELIMINARY COSTS (FIELD SURVEYS AND INVESTIGATIONS) ARE NOT SUBJECT TO THE LIMITATION. THE CURRENT PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) REFLECT THE ABOVE-STATED POSITION. ASPR 18-306.2 (B) AND 18-306.3 PROVIDE WITH RESPECT TO FIRM FIXED-PRICE TYPE ARCHITECT- ENGINEER CONTRACTS AND COST-REIMBURSEMENT CONTRACTS FOR ARCHITECT-ENGINEER SERVICES THAT:

* * * IF, HOWEVER, THE CONTRACT ALSO COVERS ANY TYPE SERVICES OTHER THAN THE PREPARATION OF DESIGNS, PLANS, DRAWINGS AND SPECIFICATIONS, THAT PART OF THE CONTRACT PRICE FOR SUCH OTHER SERVICES SHALL NOT BE SUBJECT TO THE SIX PERCENT (6 PERCENT) LIMITATION.

WE HAVE ALREADY AGREED THAT ONLY THE CONTRACT COSTS ATTRIBUTABLE TO THE PRODUCTION AND DELIVERY OF DESIGNS, PLANS, DRAWINGS, ETC., ARE SUBJECT TO THE FEE LIMITATION IMPOSED BY THE 1939 STATUTES AS CODIFIED. WE ADHERE TO OUR CONCLUSION IN 21 COMP. GEN. 580 AND 22 ID. 464 WITH REFERENCE TO CERTAIN COST ITEMS THAT MAY BE EXCLUDED FROM OPERATION OF THE 1939 LIMITATION. HOWEVER, WE BELIEVE APPLICATION OF THOSE DECISIONS IN THE BROAD SENSE TO THE FEE LIMITATION PRESCRIBED BY 10 U.S.C. 2306 (D) IS NOT JUSTIFIED.

IT IS NECESSARY AGAIN TO CONSIDER THE LEGAL IMPORT OF SECTION 4 (B) OF THE 1947 ACT FROM WHICH THE CODIFICATION OF SECTION 2306 (D) WAS DERIVED.

H. REPT. NO. 109, 80TH CONG., 1ST SESS., ON H.R. 1366, WHICH WAS ENACTED AS THE ARMED SERVICES PROCUREMENT ACT OF 1947, CONTAINS AN ANALYSIS OF THE LEGISLATION PREPARED BY THE THEN WAR DEPARTMENT WHICH, TOGETHER WITH THE DEPARTMENT OF THE NAVY, DRAFTED THE LEGISLATION. PAGE 33 OF THAT REPORT DEALING WITH SECTION 4 OF H.R. 1366 READS IN PERTINENT PART:

IT IS ALSO DIRECTED THAT AGREEMENTS FOR THE FURNISHING OF ARCHITECTURAL OR ENGINEERING SERVICES RELATING TO ANY PUBLIC WORKS OR UTILITY PROJECT SHALL NOT PROVIDE FOR THE PAYMENT OF A FEE IN EXCESS OF 6 PERCENT OF THE ESTIMATED COST OF THE PROJECT. IN THIS INSTANCE IT SHOULD BE NOTED THAT THE LIMITATION OF THE FEE TO THE CONTRACTOR IS INCLUSIVE OF ALL COSTS INCURRED BY HIM IN THE PERFORMANCE OF THE CONTRACT. THIS PROVISION FOLLOWS SECTION 3 OF THE ACT OF APRIL 25, 1939, ABOVE REFERRED TO (54 STAT. 591; 34 U.S.C. 556).

IN CONTRAST TO THE 1939 STATUTES, THE 1947 STATUTE FIXED A MAXIMUM FEE "IN CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES.' THE LIMITATION IN SECTION 4 (B) THEREFORE RELATES TO THE MAXIMUM FEE PAYABLE UNDER SUCH CONTRACTS AND IS NOT RELATED TO THE "COST" OF PROFESSIONAL SERVICES INVOLVED IN FURNISHING DESIGNS, PLANS, ETC. IN FACT, IT IS SIGNIFICANT THAT THE 1947 STATUTE, AS DISTINGUISHED FROM THE 1939 STATUTES, MAKES NO REFERENCE TO THE "PRODUCTION AND DELIVERY OF THE DESIGNS, PLANS, DRAWINGS, AND SPECIFICATIONS.' RATHER, THE CODIFICATION LIMITS THE FEE FOR "PERFORMING" A CONTRACT FOR "ARCHITECTURAL OR ENGINEERING SERVICES.' FURTHER, UNLIKE THE 1947 ACT, THE 1939 STATUTES LIMIT THE FEE WHICH MAY BE PAID FOR "ANY SERVICE AUTHORIZED" BY THE STATUTES, THAT IS, SERVICES RELATING TO THE PREPARATION AND DELIVERY OF DESIGNS, PLANS, ETC. WE REGARD THE 1947 LIMITATION AS CODIFIED AS ONE UPON THE TOTAL CONTRACT PRICE FOR "ARCHITECTURAL OR ENGINEERING SERVICES" AND NOT A LIMITATION UPON THE FEE FOR A PORTION OF THE CONTRACT SERVICES. IN OUR OPINION, SECTION 2306 (D) LIMITS THE TOTAL AMOUNT (COSTS PLUS PROFIT) THAT LEGALLY MAY BE PAID UNDER A CONTRACT FOR THESE PROFESSIONAL SERVICES IRRESPECTIVE OF WHETHER PARTICULAR CONTRACT COSTS RELATE TO THE PRODUCTION AND DELIVERY OF DESIGNS, PLANS, ETC., OR WHETHER THEY REPRESENT TRAVEL EXPENSES, COSTS OF EXPERT TECHNICAL ASSISTANCE OR FOR SUPERVISION OF CONSTRUCTION, OR THE LIKE. MOREOVER, CONTRACT COSTS CATEGORIZED AS ENGINEERING SERVICES ARE ALSO SUBJECT TO THE FEE LIMITATION SINCE SECTION 2306 (D) REFERS TO "ENGINEERING" SERVICES AS WELL AS TO "ARCHITECTURAL" SERVICES.

WE ARE AWARE OF THE LONG-ESTABLISHED ADMINISTRATIVE PRACTICE OF EXCLUDING CERTAIN CONTRACT COSTS FROM APPLICATION OF THE FEE LIMITATION BECAUSE THEY DO NOT RELATE TO THE PRODUCTION AND DELIVERY OF DESIGNS, PLANS, ETC. HOWEVER, AS STATED ABOVE, SUCH EXCLUSIONS ARE BOTTOMED ON THE PARTICULAR LANGUAGE OF THE 1939 STATUTES AS CODIFIED. THE LANGUAGE OF SECTION 2306 (D) IS NOT SUSCEPTIBLE TO THE SAME INTERPRETATION, AND OUR DECISIONS IN 21 AND 22 COMP. GEN. DO NOT CONSTITUTE OVERRIDING PRECEDENTS SINCE THOSE DECISIONS WERE CONCERNED WITH THE 1939 STATUTES AND NOT WITH SECTION 4 (B) OF THE 1947 ACT AS CODIFIED IN 10 U.S.C. 2306 (D).

WHILE WE ARE OF THE OPINION THAT SECTION 2306 (D) PERMITS NO EXCLUSIONS OF COSTS FROM APPLICATION OF THE 6-PERCENT FEE LIMITATION, NO ACTION IN CASES INVOLVING THIS QUESTION WILL BE TAKEN BY OUR OFFICE SINCE WE ARE CURRENTLY CONDUCTING A GOVERNMENT-WIDE REVIEW OF ARCHITECT ENGINEER CONTRACTING PROCEDURES GENERALLY WITH THE VIEW TO SUBMITTING APPROPRIATE RECOMMENDATIONS TO THE CONGRESS EARLY NEXT YEAR.

THE ASSISTANT SECRETARY ADVISES THAT BOTH THE ARMY AND THE AIR FORCE UTILIZE THE AUTHORITY OF 10 U.S.C. 2304 (A) (4) TO NEGOTIATE DOMESTIC ARCHITECT-ENGINEER CONTRACTS, AND THAT SINCE 10 U.S.C. 7212, SPECIFICALLY APPLICABLE TO THE NAVY, AUTHORIZES SUCH CONTRACTS WITHOUT ADVERTISING, NAVY ARHITECT CONTRACTS ARE NEGOTIATED UNDER 10 U.S.C. 2304 (A) (17) AS "OTHERWISE AUTHORIZED BY LAW.' IN THIS REGARD, IT IS POINTED OUTTHAT ASFR 3-204.3 LIMITS THE USE OF 10 U.S.C. 2304 (A) (4/-- THE NEGOTIATION EXCEPTION RELATING TO PERSONAL OR PROFESSIONAL SERVICES--- TO SITUATIONS WHEREIN NO OTHER NEGOTIATION EXCEPTION IS AVAILABLE. WE ARE FURTHER ADVISED THAT THE FEE LIMITATIONS OF THE 1939 STATUTES AS CODIFIED ARE CONSIDERED TO BE APPLICABLE TO ALL ARCHITECT-ENGINEER CONTRACTS WHETHER OR NOT SUCH STATUTES ARE USED AS THE AUTHORITY TO NEGOTIATE THE CONTRACTS. WE ARE OF THE OPINION THAT THE 1939 STATUTES AS CODIFIED, AS WELL AS 10 U.S.C. 2304 (D), CONSTITUTE BASIC AUTHORITY TO NEGOTIATE ARCHITECT- ENGINEER CONTRACTS. WHILE ONLY 10 U.S.C. 7212 SPECIFICALLY AUTHORIZES THE NAVY TO PROCURE THESE PROFESSIONAL SERVICES WITHOUT ADVERTISING, BOTH THE ARMY AND THE AIR FORCE WOULD APPEAR TO HAVE THE EQUIVALENT AUTHORITY UNDER 10 U.S.C. 4540 AND 9540, RESPECTIVELY. THE 1939 STATUTES UPON WHICH ALL THREE CODIFICATIONS ARE BASED EXCEPTED THE PROCUREMENT OF ARCHITECT ENGINEER SERVICES FROM THE ADVERTISING STATUTE. HOWEVER, PUBLIC LAW 1028, WHICH CODIFIED THE PERTINENT PORTIONS OF THE 1939 STATUTES, DID NOT CARRY FORWARD THE ADVERTISING EXEMPTION WITH RESPECT TO THE ARMY AS IT DID SPECIFICALLY IN THE CASE OF THE NAVY. SEE PAGES 308 AND 524 OF S. REPT. NO. 2484, 84TH CONG. 2D SESS., ON THE CODIFICATION LEGISLATION. THE BASIS FOR THE OMISSION IN THE CASE OF THE ARMY IS NOT EXPLAINED IN THE LEGISLATIVE HISTORY OF THE CODIFICATION STATUTE OR IN THE HISTORICAL AND REVISION NOTES TO THE APPLICABLE CODE SECTIONS. HOWEVER, SINCE SECTION 49 OF THE CODIFICATION STATUTE PROVIDED THAT IT WAS THE LEGISLATIVE PURPOSE TO "RESTATE, WITHOUT SUBSTANTIVE CHANGE," THE LAW SUPERSEDED BY THE CODIFICATION, WE FEEL THAT THE OMISSION OF THE ADVERTISING EXEMPTION WAS INADVERTENT. FOR THIS REASON, AND IN THE LIGHT OF THE PRINCIPLES OF STATUTORY CONSTRUCTION DISCUSSED ABOVE, WE BELIEVE THAT SECTIONS 4540 AND 9540 OF TITLE 10 SHOULD BE REGARDED AS A BASIS FOR AUTHORIZING THE NEGOTIATION OF ARCHITECT-ENGINEERING CONTRACTS PURSUANT TO 10 U.S.C. 2304 (A) (17).

WE DO NOT, HOWEVER, BELIEVE THAT THE CODIFICATIONS OF THE 1939 STATUTES ARE SELF-EXECUTING. UNDER THESE STATUTES, THE HEAD OF THE MILITARY DEPARTMENT MUST DETERMINE THAT IT IS ADVANTAGEOUS TO THE NATIONAL DEFENSE AND THAT EXISTING MILITARY FACILITIES ARE INADEQUATE BEFORE THE PROCUREMENT AUTHORITY OF THOSE STATUTES MAY BE INVOKED. SEE S. REPT. NO. 263, 76TH CONG., 1ST SESS., ON H.R. 4278 WHICH WAS ENACTED AS PUBLIC LAW 43, APPROVED APRIL 25, 1939, AND COMPANION H. REPT. NO. 1312, 76TH CONG., 1ST SESS. WE ASSUME THAT SUFFICIENT STATUTORY BASES EXIST FOR A DELEGATION OF AUTHORITY TO MAKE THE DETERMINATIONS REQUIRED BY THE CODIFICATIONS. SEE 10 U.S.C. 133 (D), AND SECTION 5 OF REORGANIZATION PLAN NO. 6 OF 1953, 67 STAT. 639, 5 U.S.C. 133Z-15 NOTE (1958 ED.).

THE 6-PERCENT LIMITATION OF THE 1939 CODIFICATIONS HAS REFERENCE ONLY TO THOSE ARCHITECT-ENGINEER CONTRACTS NEGOTIATED UNDER THOSE CODIFICATIONS. HENCE, THE PERMISSIVE EXCLUSIONS OF COSTS FROM APPLICATION OF THAT FEE LIMITATION MAY BE REFLECTED ONLY IN CONTRACTS EXECUTED PURSUANT TO THOSE CODIFICATIONS AND NOT IN CONTRACTS EXECUTED PURSUANT TO THE NEGOTIATION AUTHORITY OF 10 U.S.C. 2304 (A) (4). IN THE LATTER RESPECT, WE POINT OUT AGAIN THAT THE FEE LIMITATION OF SECTION 2306 (D/--- APPLICABLE TO CONTRACTS NEGOTIATED UNDER SECTION 2304 (A) (4/--- SHOULD NOT BE RESTRICTED TO COSTS INVOLVING ONLY THE PREPARATION AND DELIVERY OF DESIGNS, PLANS, ETC., SUCH AS IS THE CASE UNDER THE 1939 CODIFICATIONS.

WE ARE FURTHER ADVISED IN THE NOVEMBER 5 LETTER THAT, WITH REFERENCE TO THE REQUIREMENTS OF 10 U.S.C. 2304 (G) FOR COMPETITIVE NEGOTIATION, THE PROVISIONS OF SECTION XVIII, ASPR, ARE FOLLOWED IN THE SOLICITATION AND AWARD OF ARCHITECT-ENGINEER CONTRACTS. IN THIS REGARD, IT IS POINTED OUT THAT SINCE THE STANDARDS OF PROFESSIONAL PRACTICE OF ARCHITECTS AND ENGINEERS DO NOT PERMIT PRICE COMPETITION FOR AWARD OF A CONTRACT, THE SELECTION OF THE CONTRACTOR IS BASED ON TECHNICAL ABILITY. THE SELECTION AND NEGOTIATION PROCEDURES AS SET OUT IN ASPR 18-402.2 AND IN ASPR 18- 306.2 (A), RESPECTIVELY, REFLECT THE FOREGOING PRINCIPLE.

ASPR 3-805.1 WHICH PRESCRIBES THE NEGOTIATION PROCEDURES TO BE APPLIED IN THE SELECTION OF OFFERORS FOR NEGOTIATION AND AWARD IS AN IMPLEMENTATION OF 10 U.S.C. 2304 (G). THAT PROVISION OF LAW READS AS FOLLOWS:

(G) IN ALL NEGOTIATED PROCUREMENTS IN EXCESS OF $2,500 IN WHICH RATES OR PRICES ARE NOT FIXED BY LAW OR REGULATION AND IN WHICH TIME OF DELIVERY WILL PERMIT, PROPOSALS SHALL BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED, AND WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED: PROVIDED, HOWEVER, THAT THE REQUIREMENTS OF THIS SUBSECTION WITH RESPECT TO WRITTEN OR ORAL DISCUSSIONS NEED NOT BE APPLIED TO PROCUREMENTS IN IMPLEMENTATION OF AUTHORIZED SET-ASIDE PROGRAMS OR TO PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT, THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES AND WHERE THE REQUEST FOR PROPOSALS NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION.

THE PERTINENT PROVISIONS OF PART 8--- PRICE NEGOTIATION POLICIES AND TECHNIQUES--- OF SECTION III, ASPR, WHICH ARE PARTICULARLY FOR CONSIDERATION HERE ARE AS FOLLOWS:

3-804 CONDUCT OF NEGOTIATIONS. EVALUATION OF OFFERORS' OR CONTRACTORS' PROPOSALS, INCLUDING PRICE REVISION PROPOSALS, BY ALL PERSONNEL CONCERNED, WITH THE PROCUREMENT, AS WELL AS SUBSEQUENT NEGOTIATIONS WITH THE OFFEROR OR CONTRACTOR, SHALL BE COMPLETED EXPEDITIOUSLY. COMPLETE AGREEMENT OF THE PARTIES ON ALL BASIC ISSUES SHALL BE THE OBJECTIVE OF THE CONTRACT NEGOTIATIONS. ORAL DISCUSSIONS OR WRITTEN COMMUNICATIONS SHALL BE CONDUCTED WITH OFFERORS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID. * * *

3-805.1 GENERAL.

(A) AFTER RECEIPT OF INITIAL PROPOSALS, WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED, EXCEPT THAT THIS REQUIREMENT NEED NOT NECESSARILY BE APPLIED TO:

(I) PROCUREMENTS NOT IN EXCESS OF $2,500;

(II) PROCUREMENTS IN WHICH PRICES OR RATES ARE FIXED BY LAW OR REGULATIONS;

(III) PROCUREMENTS IN WHICH TIME OF DELIVERY WILL NOT PERMIT SUCH DISCUSSIONS;

(IV) PROCUREMENTS OF THE SET-ASIDE PORTION OF PARTIAL SET-ASIDES OR BY SMALL BUSINESS RESTRICTED ADVERTISING;

(V) PROCUREMENTS IN WHICH IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT OR SERVICE THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE. (PROVIDED, HOWEVER, THAT IN SUCH PROCUREMENTS, THE REQUEST FOR PROPOSALS SHALL NOTIFY ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED AND HENCE, THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT. ANY CASE WHERE THERE IS UNCERTAINTY AS TO THE PRICING OR TECHNICAL ASPECTS OF ANY PROPOSALS, THE CONTRACTING OFFICER SHALL NOT MAKE AWARD WITHOUT FURTHER EXPLORATION AND DISCUSSION PRIOR TO AWARD. ALSO, WHEN THE PROPOSAL MOST ADVANTAGEOUS TO THE GOVERNMENT INVOLVES A MATERIAL DEPARTURE FROM THE STATED REQUIREMENTS, CONSIDERATION SHALL BE GIVEN TO OFFERING THE OTHER FIRMS WHICH SUBMITTED PROPOSALS AN OPPORTUNITY TO SUBMIT NEW PROPOSALS ON A TECHNICAL BASIS WHICH IS COMPARABLE TO THAT OF THE MOST ADVANTAGEOUS PROPOSALS * * *.

(B) WHENEVER NEGOTIATIONS ARE CONDUCTED WITH MORE THAN ONE OFFEROR, NO INDICATION SHALL BE MADE TO ANY OFFEROR OF A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION SINCE SUCH PRACTICE CONSTITUTES AN AUCTION TECHNIQUE WHICH MUST BE AVOIDED. AFTER RECEIPT OF PROPOSALS, NO INFORMATION REGARDING THE NUMBER OR IDENTITY OF THE OFFERORS PARTICIPATING IN THE NEGOTIATIONS SHALL BE MADE AVAILABLE TO THE PUBLIC OR TO ANY ONE WHOSE OFFICIAL DUTIES DO NOT REQUIRE SUCH KNOWLEDGE. WHENEVER NEGOTIATIONS ARE CONDUCTED WITH SEVERAL OFFERORS, WHILE SUCH NEGOTIATIONS MAY BE CONDUCTED SUCCESSIVELY, ALL OFFERORS SELECTED TO PARTICIPATE IN SUCH NEGOTIATIONS (SEE (A) ABOVE) SHALL BE OFFERED AN EQUITABLE OPPORTUNITY TO SUBMIT SUCH PRICE, TECHNICAL, OR OTHER REVISIONS IN THEIR PROPOSALS AS MAY RESULT FROM THE NEGOTIATIONS. * * *.

(C) EXCEPT WHERE COST-REIMBURSEMENT TYPE CONTRACTS ARE TO BE USED (SEE 3- 805.2), A REQUEST FOR PROPOSALS MAY PROVIDE THAT AFTER RECEIPT OF INITIAL TECHNICAL PROPOSALS, SUCH PROPOSALS WILL BE EVALUATED TO DETERMINE THOSE WHICH ARE ACCEPTABLE TO THE GOVERNMENT OR WHICH, AFTER DISCUSSION, CAN BE MADE ACCEPTABLE, AND UPON SUBMISSION OF PRICES THEREAFTER, AWARD SHALL BE MADE TO THAT OFFEROR OF AN ACCEPTABLE PROPOSAL WHO IS THE LOW RESPONSIBLE OFFEROR.

(D) THE PROCEDURES SET FORTH IN (A), (B) AND (C) ABOVE MAY NOT BE APPLICABLE IN APPROPRIATE CASES WHEN PROCURING RESEARCH AND DEVELOPMENT, OR SPECIAL SERVICES (SUCH AS ARCHITECT-ENGINEER SERVICES) OR WHEN COST- REIMBURSEMENT TYPE CONTRACTING IS ANTICIPATED. AWARD OF A CONTRACT MAY BE PROPERLY INFLUENCED BY THE PROPOSAL WHICH PROMISES THE GREATEST VALUE TO THE GOVERNMENT IN TERMS OF POSSIBLE PERFORMANCE, ULTIMATE PRODUCIBILITY, GROWTH POTENTIAL AND OTHER FACTORS RATHER THAN THE PROPOSAL OFFERING THE LOWEST PRICE OR PROBABLE COST AND FIXED FEE.

(E) WHEN, DURING NEGOTIATIONS, A SUBSTANTIAL CHANGE OCCURS IN THE GOVERNMENT'S REQUIREMENTS OR A DECISION IS REACHED TO RELAX, INCREASE OR OTHERWISE MODIFY THE SCOPE OF THE WORK OR STATEMENT OF REQUIREMENTS, SUCH CHANGE OR MODIFICATION SHALL BE MADE IN WRITING AS AN AMENDMENT TO THE REQUEST FOR PROPOSAL OR REQUEST FOR QUOTATIONS, AND A COPY SHALL BE FURNISHED TO EACH PROSPECTIVE CONTRACTOR. * * *.

WHILE SUBSECTION (D) PROVIDES THAT ARCHITECT-ENGINEER CONTRACTS MAY BE EXCLUDED FROM THE ABOVE PROCEDURES, ASPR 3-102 (C) PROVIDES:

NEGOTIATED PROCUREMENTS SHALL BE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICAL EXTENT. * * *.

THE PROCEDURES FOLLOWED IN OBTAINING ARCHITECT-ENGINEER SERVICES IN ESSENCE RESULT IN "SOLE SOURCE" PROCUREMENT IN THAT ONCE A PROSPECTIVE CONTRACTOR IS "SELECTED" ON THE BASIS OF TECHNICAL ABILITY, NEGOTIATIONS ARE CONDUCTED WITH HIM ALONE TO THE EXCLUSION OF OTHER EQUALLY QUALIFIED ARCHITECT-ENGINEERS. AN EXAMINATION OF PART 4 OF ASPR XVIII REVEALS THAT THE PROCEDURES FOR THE ,SELECTION" OF ARCHITECT-ENGINEER FIRMS FOR THE AWARD OF CONTRACTS DO NOT CONFORM STRICTLY TO THE REQUIREMENTS OF ASPR 3- 500, ET SEQ., RESPECTING THE PREPARATION OF REQUESTS FOR PROPOSALS OR REQUEST FOR QUOTATIONS. UNDER CURRENT PROCEDURES, ARCHITECT-ENGINEERS ARE SELECTED FROM THOSE FIRMS WHICH, AFTER FILING GSA STANDARD FORM 251,"U.S. GOVERNMENT ARCHITECT-ENGINEER STIONNAIRE," ARE LISTED IN AN ARCHITECT- ENGINEER QUALIFICATIONS DATA FILE. THESE PROVISIONS OF ASPR XVIII ARE SOMEWHAT INCONSISTENT WITH THE PROVISIONS OF ASPR III DEALING WITH PROCUREMENTS BY NEGOTIATION GENERALLY. THESE PROVISIONS IN ASPR III WHICH, IN THE MAIN, ARE IMPLEMENTATIONS OF THE NEGOTIATION AUTHORIZATIONS AND LIMITATIONS PRESCRIBED IN TITLE 10 OF THE U.S.C. SUBSTANTIALLY REFLECT THE LONG-ESTABLISHED ADMINISTRATIVE PRACTICES EMPLOYED IN SECURING ARCHITECT-ENGINEER SERVICES. ASPR 18-402.1 IS ILLUSTRATIVE OF THE PRACTICES FOLLOWED:

SELECTION POLICY. THE SELECTION OF ARCHITECT-ENGINEER FIRMS FOR PROFESSIONAL SERVICES CONTRACTS SHALL BE ACCOMPLISHED IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS PART. SUCH SELECTION SHALL NOT BE BASED UPON COMPETITIVE BIDDING PROCEDURES, BUT RATHER UPON THE PROFESSIONAL QUALIFICATIONS NECESSARY FOR THE SATISFACTORY PERFORMANCE OF THE SERVICES REQUIRED, SUBJECT TO THE FOLLOWING ADDITIONAL CONSIDERATIONS:

(I) SPECIALIZED EXPERIENCE OF THE FIRM IN THE TYPE OF WORK REQUIRED;

(II) CAPACITY OF THE FIRM TO ACCOMPLISH THE WORK IN THE REQUIRED TIME;

(III) PAST EXPERIENCE, IF ANY, OF THE FIRM WITH RESPECT TO PERFORMANCE ON DEPARTMENT OF DEFENSE CONTRACTS;

(IV) LOCATION OF THE FIRM IN THE GENERAL GEOGRAPHICAL AREA OF THE PROJECT, PROVIDED THAT THERE IS AN APPROPRIATE NUMBER OF QUALIFIED FIRMS THEREIN FOR CONSIDERATION; AND

(V) VOLUME OF WORK PREVIOUSLY AWARDED TO THE FIRM BY THE DEPARTMENT OF DEFENSE, WITH THE OBJECT OF EFFECTING AN EQUITABLE DISTRIBUTION OF DEPARTMENT OF DEFENSE ARCHITECT-ENGINEER CONTRACTS AMONG QUALIFIED ARCHITECT-ENGINEER FIRMS.

DEPARTMENT OF DEFENSE DIRECTIVE NO. 4105.45 PRESCRIBING UNIFORM STANDARDS FOR THE EMPLOYMENT AND PAYMENT OF ARCHITECT-ENGINEER SERVICES FURTHER EXEMPLIFIES THESE PRACTICES.

IN OUR OPINION, THE PRESENT PRACTICES FOLLOWED IN THE NEGOTIATION OF ARCHITECT-ENGINEER CONTRACTS REPRESENT A DEVIATION FROM THE STATUTORY REQUIREMENTS EXPRESSED IN 10 U.S.C. 2304 (G) THAT PROPOSALS FROM A MAXIMUM NUMBER OF QUALIFIED SOURCES SHALL BE SOLICITED AND THAT WRITTEN OR ORAL DISCUSSIONS BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED.

IN THIS REGARD 43 COMP. GEN. 353, 370-371, HELD IN PERTINENT PART:

* * * IT WOULD APPEAR TO BE ESPECIALLY PERTINENT TO NOTE THAT H.R. 1366, 80TH CONGRESS, WHICH SUBSEQUENTLY WAS ENACTED AS THE ARMED SERVICES PROCUREMENT ACT OF 1947, 41 U.S.C. 151 NOTE (1952 ED.), ORIGINALLY INCLUDED, AS SECTION 1/XII), A REQUEST FOR AUTHORITY TO NEGOTIATE UNDER THE FOLLOWING CIRCUMSTANCES: "/XII) FOR SUPPLIES OR SERVICES AS TO WHICH THE AGENCY HEAD DETERMINES THAT ADVERTISING AND COMPETITIVE BIDDING WOULD NOT SECURE SUPPLIES OR SERVICES OF A QUALITY SHOWN TO BE NECESSARY IN THE INTEREST OF THE GOVERNMENT.'

AS PASSED BY THE HOUSE OF REPRESENTATIVES, H.R. 1366 INCLUDED THIS AUTHORITY, AND THE NECESSITY AND JUSTIFICATION FOR ITS ENACTMENT BY THE SENATE WAS PRESENTED TO THE SENATE COMMITTEE ON ARMED SERVICES BY THE ASSISTANT SECRETARY OF THE NAVY DURING HEARINGS ON JUNE 24, 1947, WITH THE FOLLOWING CONCLUDING STATEMENT:

"WHERE QUALITY IS A MATTER OF CRITICAL--- IN MANY CASES LIFE-AND DEATH--- IMPORTANCE, DISCRETION MUST RESIDE IN THE SERVICES TO SELECT SOURCES WHERE EXPERIENCE, EXPERTNESS, KNOW-HOW, FACILITIES AND CAPACITIES ARE BELIEVED TO ASSURE PRODUCTS OF THE REQUISITE QUALITY. WHERE NATIONAL SECURITY OR THE SAFETY AND HEALTH OF PERSONNEL OF THE SERVICES ARE INVOLVED, ANY COMPROMISE OF QUALITY DICTATED BY MANDATORY CONSIDERATIONS OF PRICE WOULD BE INDEFENSIBLE. (SEE PAGE 15, HEARINGS BEFORE THE COMMITTEE ON ARMED SERVICES, UNITED STATES SENATE, ON H.R. 1366, 80TH CONGRESS.)"

NOTWITHSTANDING THE ABOVE, THE SENATE ARMED SERVICES COMMITTEE DELETED THIS PROVISION FROM THE BILL AND EXPLAINED ITS ACTION AT PAGE 3, S. REPT. NO. 571, 80TH CONGRESS, AS FOLLOWS:

"THE BILL WAS AMENDED BY DELETING THE AUTHORITY TO NEGOTIATE CONTRACTS FOR THE PURPOSE OF SECURING A PARTICULAR QUALITY OF MATERIALS. YOUR COMMITTEE IS OF THE OPINION THAT THIS SECTION IS OPEN TO CONSIDERABLE ADMINISTRATIVE ABUSE AND WOULD BE EXTREMELY DIFFICULT TO CONTROL. FOR THIS REASON IT HAS BEEN ELIMINATED.'

THE REJECTION BY THE CONGRESS OF THIS REQUEST FOR NEGOTIATION AUTHORITY MUST THEREFORE BE CONSTRUED AS A PROHIBITION AGAINST THE NEGOTIATION OF CONTRACTS WITHOUT PRICE COMPETITION, WHERE THE FAILURE TO OBTAIN PRICE COMPETITION IS BASED SOLELY UPON A DETERMINATION BY THE CONTRACTING AGENCY THAT A PARTICULAR PROSPECTIVE CONTRACTOR WILL DELIVER SUPPLIES AND/OR SERVICES OF A HIGHER QUALITY THAN ANY OTHER CONTRACTOR. 41 COMP. GEN. 484.

IN A DETAILED ANALYSIS OF THE PROVISIONS OF H.R. 1366, REFERRED TO ABOVE, CONTAINED IN H. REPT. NO. 109, 80TH CONG., 1ST SESS., IT WAS STATED:

PROCUREMENT BY NEGOTIATION AS PRACTICED BY THE SERVICES AND INDUSTRY CONSISTS OF FIRST SECURING INFORMAL QUOTATIONS FROM AS MANY SOURCES AS PRACTICABLE, USUALLY ACCOMPANIED BY BREAK-DOWNS OF ELEMENTS OF COST. SEPARATE NEGOTIATIONS THEN USUALLY BEGIN WITH THE LOWER BIDDERS, IN ORDER TO REDUCE THE PRICE BY ELIMINATING UNNECESSARY OR UNJUSTIFIED CHARGES. WHEN THE BEST POSSIBLE AGREEMENT HAS BEEN REACHED, AN APPROPRIATE CONTRACT IS AWARDED THE SUCCESSFUL FIRM. EXPERIENCE HAS SHOWN THAT BY CAREFUL NEGOTIATION AND BY DRAFTING A SUITABLE CONTRACT IT IS FREQUENTLY POSSIBLE TO SECURE SUBSTANTIAL SAVINGS FOR THE GOVERNMENT. NEGOTIATION, PROPERLY EMPLOYED, CAN PROMOTE AND INTENSIFY COMPETITION.

THE CHIEF DIFFERENCE BETWEEN THE TWO METHODS OF PROCUREMENT LIES IN THE FACT THAT THE ADVERTISING SYSTEM IS LARGELY MECHANICAL IN REQUIRING AWARD TO THE RESPONSIBLE BIDDER OFFERING THE LOWEST ORIGINAL BID. IN CONTRAST, NEGOTIATION ALLOWS THE USE OF DISCRETION AND PROVIDES THE OPPORTUNITY TO ARRIVE AT BETTER TERMS.

SEE, ALSO, PAGES 16 AND 17 OF H. REPT. NO. 1959, 86TH CONG., 2D SESS., OF A SPECIAL SUBCOMMITTEE OF THE COMMITTEE ON ARMED SERVICES, HOUSE OF REPRESENTATIVES, ON PROCUREMENT PRACTICES OF THE DEPARTMENT OF DEFENSE.

THEREFORE, IT WOULD APPEAR THAT "NEGOTIATION" AS CONTEMPLATED BY SECTION 2 (C) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 (10 U.S.C. 2304 (A) ( WAS INTENDED TO MEAN "COMPETITIVE NEGOTIATION" WHEREBY ALL QUALIFIED FIRMS ARE TO BE GIVEN AN OPPORTUNITY TO SUBMIT PRICED PROPOSALS WHICH, IF TRULY COMPETITIVE, ORDINARILY WOULD BE THE SUBJECT OF ORAL OR WRITTEN DISCUSSIONS WITH PROCUREMENT PERSONNEL.

THE TERM "NEGOTIATION" WAS DEFINED IN PUBLIC LAW 87-653 WHICH ADDED A NEW SUBSECTION "G" TO 10 U.S.C. 2304. S. REPT. NO. 1884, 87TH CONG., 2D SESS., ON H.R. 5532, WHICH WAS ENACTED AS PUBLIC LAW 87-653, STATED IN PERTINENT PART:

EXISTING PROCUREMENT LAW DOES NOT DEFINE THE WORD "NEGOTIATION" EXCEPT TO INDICATE THAT IT MEANS "MAKE WITHOUT FORMAL ADVERTISING.' SECTION (C) OF THE BILL WOULD ADD A NEW SECTION TO PROCUREMENT LAW REQUIRING, WITH CERTAIN EXCEPTIONS, THAT ORAL OR WRITTEN DISCUSSIONS BE HAD IN NEGOTIATED PROCUREMENTS WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE. EXCEPTED FROM THIS REQUIREMENT WOULD BE PROCUREMENTS INVOLVING NOT MORE THAN $2,500, THOSE IN WHICH PRICES OR RATES ARE FIXED BY LAW OR REGULATIONS, THOSE IN WHICH TIME OF DELIVERY WILL NOT PERMIT SUCH DISCUSSIONS, THOSE INVOLVING AUTHORIZED SET-ASIDE PROGRAMS, AND THOSE IN WHICH IT CAN BE CLEARLY SHOWN THAT ADEQUATE COMPETITION OR PRIOR COST EXPERIENCE IS LIKELY TO PRODUCE REASONABLE PRICES WITHOUT SUCH DISCUSSIONS. IN THE LATTER EXCEPTION THE REQUEST FOR PROPOSALS SHOULD NOTIFY ALL OFFERORS OF THE POSSIBILITY THAT THE AWARD MAY BE MADE WITHOUT DISCUSSIONS.

IF DISCUSSIONS ARE UNNECESSARY IN THE ORDINARY CASE, IT IS DIFFICULT TO UNDERSTAND THAT THE PROCUREMENT COULD NOT HAVE BEEN ACCOMPLISHED BY FORMAL ADVERTISING. AT THE SAME TIME, AN INFLEXIBLE REQUIREMENT FOR DISCUSSIONS WITH ALL OFFERORS COULD ENCOURAGE THE OFFERORS TO PAD THEIR INITIAL PROPOSALS AND NOT TO QUOTE THEIR BEST PRICES FIRST.

H. REPT. NO. 1638 ON H.R. 5532 CONTAINS THE FOLLOWING OBSERVATIONS AS TO "NEGOTIATION: "

SECTION (E) CONTAINS BOTH DIRECTION AND MANDATE WITH RESPECT TO NEGOTIATED PROCUREMENT AND THE METHOD BY WHICH IT SHALL BE CONDUCTED.

THE ARMED SERVICES PROCUREMENT ACT OF 1947 DID NOT DEFINE WHAT SHOULD CONSTITUTE NEGOTIATION. IN THE CODIFICATION OF 1958, THE ACT WAS REWORDED TO STATE THAT THERE WERE TWO CATEGORIES OF PROCUREMENT, BY METHOD: (1) FORMAL ADVERTISED SEALED COMPETITIVE BIDDING, AND (2) NEGOTIATED PROCUREMENT.

THE PROBLEM HAS USUALLY BEEN ONE OF INTERPRETING WHAT WAS MEANT BY "NEGOTIATION.'

THIS WORD IS NOT DEFINED IN THE STATUTE. BUT THE WORD DOES HAVE A MEANING IN COMMON PARLANCE. IT IS THAT WHEN NEGOTIATIONS ARE INVITED AND PROPOSALS FOR NEGOTIATIONS ARE OFFERED, THERE SHOULD BE WRITTEN OR ORAL DISCUSSIONS.

THE MILITARY ESTABLISHMENT HAVE NOT ALWAYS BEEN READY TO GRANT THAT DISCUSSIONS SHOULD TAKE PLACE. THIS SECTION PROVIDES (AND IT IS NOT OBJECTED TO BY THE DEPARTMENT OF DEFENSE AND IT WAS PROPOSED BY THE COMPTROLLER GENERAL) TO EMPHASIZE NOT ONLY THE VALUE BUT THE NECESSITY FOR WRITTEN OR ORAL DISCUSSIONS BEFORE FINAL PRICING AND AWARD OF CONTRACTS WHEN THE PROPOSERS ARE WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED.

THIS SECTION LIKEWISE RECOGNIZES THAT WHERE UNILATERAL SET-ASIDES HAVE BEEN MADE, DISCUSSIONS ARE NOT NECESSARY TO THE FINAL DETERMINATION. COMPETITION AS TO PRICE HAS ALREADY OCCURRED, AND THE QUALIFICATION OF THE CONCERN IS UNDER ONE OF THE THREE SET-ASIDE PROGRAMS ALREADY DEFINED. AWARD, THEREFORE, DOES NOT REQUIRE DISCUSSIONS EITHER AS TO PRICE OR PERFORMANCE. DISCUSSIONS WOULD BE FUTILE.

THE SECTION, HOWEVER, GIVES AUTHORITY, NOW BEING EXERCISED WITH FEWER RESTRICTIONS IN 3-805 OF THE ARMED SERVICES PROCUREMENT REGULATIONS. AWARDS ARE NOW MADE WITHOUT DISCUSSION, WHEN THE OFFERORS HAVE BEEN NOTIFIED IN ADVANCE THAT FINAL AND FIRM PROPOSALS ARE TO BE MADE. UNDER THIS PROVISION, SUCH INVITATIONS MAY BE ISSUED ONLY WHEN THERE IS A CLEAR EVIDENCE OF ADEQUATE COMPETITION OR WHERE THERE IS ACCURATE, PRIOR COST EXPERIENCE WITH THE PRODUCT. THIS MUST BE DETERMINED BEFORE AWARD. THE COMPTROLLER GENERAL SUPPORTED IN PRINCIPLE AND THE DEPARTMENT OF DEFENSE SUPPORTS THIS SECTION.

IT IS A SALUTARY AND WORKABLE LAW WHICH MEETS ALMOST ALL REQUIREMENTS FOR NEGOTIATION; IF NOT IN LANGUAGE, AT LEAST BY DEFINITION.

THE THEN GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE FURTHER TESTIFIED WITH REFERENCE TO SUBSECTION "E," WHICH WAS ENACTED AS 10 U.S.C. 2304 (G), THAT:

SUBSECTION (E) WOULD AMEND SECTION 2304 BY ADDING A NEW SUBSECTION (G) WHICH WOULD PRESCRIBE THE FOLLOWING REQUIREMENTS AS TO ALL NEGOTIATED PROCUREMENTS IN EXCESS OF $2,500 IN WHICH RATES OR PRICES ARE NOT FIXED BY LAW OR REGULATION AND IN WHICH TIME OF DELIVERY WILL PERMIT:

(1) IT WOULD REQUIRE THAT PROPOSALS BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED; AND

(2) IT WOULD REQUIRE THAT WRITTEN OR ORAL DISCUSSIONS BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED, WITH THE EXCEPTION OF PROCUREMENTS IN IMPLEMENTATION OF AUTHORIZED SET-ASIDE PROGRAMS, OR OF PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSIONS WOULD RESULT IN FAIR AND REASONABLE PRICES.

WITH RESPECT TO THE FIRST REQUIREMENT, IT HAS ALWAYS BEEN THE POLICY OF THE DEPARTMENT OF DEFENSE, AND OUR REGULATIONS SO PROVIDE, THAT IN NEGOTIATED PROCUREMENT, PROPOSALS WILL BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES OF SUPPLIES OR SERVICES CONSISTENT WITH THE NATURE OF, AND REQUIREMENT FOR, THE SUPPLIES OR SERVICES TO BE PROCURED.

THE FOREGOING WOULD SEEM TO PRESENT AN INCONGRUOUS SITUATION WHERE A STRICT, LITERAL INTERPRETATION OF THE STATUTE WOULD PRODUCE A RESULT IN CONTRAVENTION OF THE LONGSTANDING STANDARD OF PROFESSIONAL PRACTICE OF ARCHITECTS AND ENGINEERS WHICH PRECLUDES PRICE COMPETITION BETWEEN MEMBERS OF THESE PROFESSIONS.

EVEN RECOGNIZING THE ALL-INCLUSIVE EFFECT OF 10 U.S.C. 2304 (G) ON THE NEGOTIATION OF CONTRACTS, IT IS ALSO RECOGNIZED THAT THE STATUTE PROVIDES THAT "COMPETITIVE" NEGOTIATION SHALL BE "CONSISTENT WITH THE NATURE AND REQUIREMENTS" OF THE SERVICES TO BE PROCURED. WE ARE NOT PREPARED TO SAY THAT THE STANDARD OF PROFESSIONAL PRACTICE CONSTITUTES, IN AND OF ITSELF, A SUFFICIENT BASIS FOR CONCLUDING THAT THE "COMPETITIVE" NEGOTIATION OF ARCHITECT-ENGINEER CONTRACTS WOULD NOT BE "CONSISTENT WITH THE NATURE AND REQUIREMENTS" OF THE SERVICES TO BE PROCURED. HOWEVER, IN VIEW OF THE LONGSTANDING ADMINISTRATIVE PRACTICE, WE WILL NOT RAISE ANY OBJECTION TO THE NEGOTIATION PROCEDURES PRESENTLY BEING UTILIZED. WE BELIEVE IT APPROPRIATE FOR OUR OFFICE TO FULLY INFORM THE CONGRESS OF THE MATTER IN OUR REPORT ON THE GOVERNMENT-WIDE REVIEW OF THE INTERPRETATIONS AND APPLICATIONS OF THE STATUTORY 6-PERCENT FEE LIMITATION IMPOSED ON ARCHITECT-ENGINEER CONTRACTS.

WE NOTE THAT THE COST OR PRICING AND THE CERTIFICATION REQUIREMENTS OF 10 U.S.C. 2306 (F), AS IMPLEMENTED BY ASPR 3-807.3, ET SEQ., ARE BEING FOLLOWED IN THE CASE OF SUCH PROCUREMENTS. WE WILL, OF COURSE, RECOGNIZE IN OUR REPORT THE VIEWS AND COMMENTS OF YOUR DEPARTMENT AS EXPRESSED IN THE NOVEMBER 5, 1966, LETTER.

WE WISH TO EXPRESS OUR APPRECIATION FOR THE ASSISTANCE RENDERED TO US IN CONNECTION WITH OUR CURRENT REVIEW.