A-92377, A-89958, MAY 13, 1938, 17 COMP. GEN. 945

A-92377, A-89958, MAY 13, 1938, 17 COMP. GEN. 945

ADVERTISING - BIDS - REJECTION - FAILURE TO COMPLY WITH MILK REGULATIONS OF DEPARTMENT OF AGRICULTURE ORDER NO. 4, ISSUED BY THE SECRETARY OF AGRICULTURE TO REGULATE THE HANDLING OF MILK IN THE BOSTON AREA MAY BE ACCEPTED AS A PART OF THE PUBLIC LAW OF THE LAND WHILE THERE IS IN EFFECT DECISION OF NOVEMBER 19, 1937, IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, UNITED STATES V. WHITING MILK CO., GRANTING PRELIMINARY INJUNCTIONS RESTRAINING SPECIFIED MILK DISTRIBUTORS FROM FURTHER VIOLATING SAID ORDER, AND, IN THE ABSENCE OF DECISIONS TO THE CONTRARY BY COURTS OF SUPERIOR JURISDICTION, WHERE INVITATIONS FOR BIDS ADVISE BIDDERS THAT COMPLIANCE WITH THE SAID ORDER WILL BE MADE A CONDITION OF THE BIDDING AND OF ANY CONTRACT AWARDED THEREUNDER, LOW BIDS SUBMITTED BY BIDDERS NOT IN COMPLIANCE THEREWITH MAY BE REJECTED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, MAY 13, 1938:

THERE WAS RECEIVED YOUR LETTER OF MARCH 2, 1938, AS FOLLOWS:

REFERENCE IS MADE TO TWO LETTERS FROM THE GENERAL ACCOUNTING OFFICE, AUDIT DIVISION, BOTH ADDRESSED TO THE PURCHASING AND CONTRACTING OFFICER, BOSTON QUARTERMASTER DEPOT, ONE BEING DATED DECEMBER 23, 1937 (FILE A-LHK- CE), AND THE OTHER DATED JANUARY 6, 1938 (FILE A-VJC-CE). IN THESE TWO LETTERS REFERENCE IS MADE TO YOUR DECISION OF OCTOBER 29, 1937 (A-89958), ADDRESSED TO THE QUARTERMASTER, HEADQUARTERS U.S. MARINE CORPS, AND THE ACTION OF THE CONTRACTING OFFICER, BOSTON QUARTERMASTER DEPOT, IN REJECTING THE BIDS SUBMITTED BY H. P. HOOD AND SONS, INC., CHARLESTOWN, MASSACHUSETTS, IS QUESTIONED.

IN BRIEF REVIEW OF THE FACTS INVOLVED YOU ARE INFORMED THAT THE INVITATIONS FOR BIDS, VIZ: 155-38-57, 155-38-68, AND 155-38-80, CONTAINED, IN ADDITION TO OTHER PROVISIONS NOT HERE GERMANE, PROVISION READING AS FOLLOWS:

"CONTRACT PROVISION FOR COMPLIANCE WITH A.A.A.--- IF ON THE DATE OF THE OPENING OF THIS BID, THERE IS IN EFFECT A MARKETING AGREEMENT, LICENSE, AND/OR ORDER APPROVED, EXECUTED, AND/OR ISSUED BY THE SECRETARY OF AGRICULTURE, UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, PERTAINING TO MILK AND ITS PRODUCTS, AND APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THIS CONTRACT, THE CONTRACTOR SHALL COMPLY WITH ALL PROVISIONS OF SUCH MARKETING AGREEMENT, LICENSE, AND/OR ORDER, OR ANY AMENDMENT THEREOF, WITHOUT REGARD TO WHETHER THE CONTRACTOR IS HIMSELF A PARTY TO THE SAID MARKETING AGREEMENT AND/OR LICENSE.

"THE CONTRACTOR SHALL NOT ACCEPT FROM A SUBCONTRACTOR OR SUPPLIER IN THE PERFORMANCE OF THIS CONTRACT ANY OF THE COMMODITIES TO BE FURNISHED UNDER THIS CONTRACT UNLESS THE SUBCONTRACTOR OR SUPPLIER HAS FILED WITH THE CONTRACTOR A CERTIFICATE OF COMPLIANCE IN FORM AS REQUIRED BY THE CONTRACTING OFFICER, OR, IF THE SECRETARY OF AGRICULTURE HAS DETERMINED THAT SUCH SUBCONTRACTOR OR SUPPLIER IS FAILING IN THE COMPLIANCE TO WHICH HE HAS CERTIFIED AND THE CONTRACTOR HAS BEEN NOTIFIED IN WRITING BY THE CONTRACTING OFFICER. IF THE CONTRACTOR VIOLATES OR FAILS TO COMPLY WITH ANY OF THE FOREGOING REQUIREMENTS, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED WITH THE DELIVERIES UNDER THIS CONTRACT AND PURCHASE IN THE OPEN MARKET OR OTHERWISE PROCURE THE UNDELIVERED PORTION OF THE COMMODITY OR COMMODITIES TO BE FURNISHED, AND THE CONTRACTOR AND HIS SURETY SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY: PROVIDED, THAT THE DETERMINATION OF THE SECRETARY OF AGRICULTURE AS TO THE FAILURE OF COMPLIANCE BY THE CONTRACTOR OR SUBCONTRACTOR SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES HERETO.'

THE INCLUSION OF SUCH A PROVISION IN ALL INVITATIONS FOR BIDS WAS DIRECTED BY PROCUREMENT CIRCULAR NO. 10, PUBLISHED BY THE WAR DEPARTMENT AND THE PHRASEOLOGY IS IN ACCORD WITH THAT PRESCRIBED BY THE DIRECTOR OF PROCUREMENT, TREASURY DEPARTMENT, IN COLLABORATION WITH OFFICIALS OF THE AGRICULTURAL ADJUSTMENT ADMINISTRATION. SUCH A REQUIREMENT IN INVITATIONS FOR BIDS IS NO MORE THAN A REQUIREMENT THAT THE BIDDER SHALL COMPLY WITH LAWS CONTROLLING INDUSTRIES AND THE INDIVIDUAL MEMBERS THEREOF. SEE 15 COMP. GEN. 201.

THE LOW BIDDER IN RESPONSE TO EACH OF THE ABOVE INVITATIONS FOR BIDS WAS H. P. HOOD AND SONS, INC., CHARLESTOWN, MASSACHUSETTS. HOWEVER, EACH BID SUBMITTED BY THIS FIRM CONTAINED A QUALIFYING STATEMENT READING AS FOLLOWS:

"THE BIDDER IS COMPLYING WITH A.A.A. MILK REGULATIONS FOR THE FALL RIVER AND NEW BEDFORD MARKETS, BUT OWING TO AN INJUNCTION ISSUED BY THE SUPERIOR COURT OF THE STATE OF MAINE IT IS PROHIBITED FROM COMPLYING WITH THE A.A.A. MILK ORDER FOR BOSTON.'

IN EACH INSTANCE THE QUARTERMASTER GENERAL DIRECTED THAT THE BID OF H. P. HOOD AND SONS, INC., BE REJECTED AS NOT BEING RESPONSIVE TO THE INVITATION.

THAT CONTRACTING OFFICERS MAY NOT PROPERLY ACCEPT BIDS WHICH ARE NOT RESPONSIVE TO THE INVITATION IS GENERALLY RECOGNIZED AND IS PREDICATED ON A PRINCIPLE OF LAW APTLY STATED IN THE FOLLOWING QUOTATION FROM AN OPINION OF THE ATTORNEY GENERAL DATED OCTOBER 13, 1928:

"IT IS WELL ESTABLISHED LAW THAT A PUBLIC OFFICER GIVEN POWER BY STATUTE TO ENTER INTO A CONTRACT ON BEHALF OF THE PUBLIC WITH THE BEST BIDDER, HAS NO POWER TO GRANT THAT BIDDER ANY TERM MATERIALLY ADVANTAGEOUS TO HIM WHICH WAS NOT ANNOUNCED IN THE ADVERTISEMENT FOR BIDS.'

IT HAS BEEN HELD BY YOUR OFFICE THAT SAID OFFICE HAS EXCLUSIVE JURISDICTION AND AUTHORITY, SUBJECT TO APPEAL TO THE CONGRESS, TO DETERMINE THE AVAILABILITY OF APPROPRIATIONS MADE IN GENERAL TERMS FOR THE SUPPORT OF THE ACTIVITIES OF THE GOVERNMENT AND THAT OPINIONS OF OTHER LEGAL AUTHORITY ARE NOT REQUIRED TO BE GIVEN APPLICATION. 5 COMP. GEN. 702. HOWEVER, IT APPEARS THAT THE AFORE QUOTED PRINCIPLE OF LAW HAS BEEN ACCEPTED BY YOUR OFFICE IN HOLDING THAT WHERE BIDDERS ATTEMPT TO CONDITION THEIR BIDS BY STIPULATIONS NOT CONTAINED IN THE ADVERTISED SPECIFICATIONS, SUCH BIDS SHOULD BE DISREGARDED, AS NOT RESPONSIVE TO THE TERMS OF THE CONTRACT OFFERED TO ALL BIDDERS IN THE ADVERTISED SPECIFICATIONS. COMP. GEN. 169. SEE ALSO 15 COMP. GEN. 201; 13 ID. 359; ID. 169; AND 16 ID. 583.

IN THE APPLICATION OF THE AFORE CITED AUTHORITIES TO THE FACTS INVOLVED, IT APPEARS THAT THE REJECTION OF THE BIDS IN QUESTION WAS ALTOGETHER PROPER.

IN FURTHER CONSIDERATION OF YOUR DECISION OF OCTOBER 29, 1937, CITED IN THE FIRST PARAGRAPH, SUPRA, REFERENCE IS MADE TO THE STATEMENT MADE THEREIN, WHICH READS AS FOLLOWS:

"OF COURSE, H. P. HOOD AND SONS, INC., IS REQUIRED TO OBEY THE ORDERS OF COURTS OF COMPETENT JURISDICTION AND ITS LOW AND RESPONSIVE BID SHOULD NOT BE REJECTED BECAUSE THE BIDDER IS REQUIRED TO OBEY THE ORDERS OF THE SUPERIOR COURT OF MAINE.'

WHILE THE INFORMATION AT YOUR DISPOSAL AT THE TIME OF YOUR DECISION OF OCTOBER 29, 1937, TO THE QUARTERMASTER, HEADQUARTERS, U.S. MARINE CORPS, WOULD JUSTIFY THE CONCLUSION REACHED THEREIN, IT IS BELIEVED THAT A REVIEW OF THE HISTORY OF THE HOOD CASE SINCE THAT TIME WILL THROW A DIFFERENT LIGHT ON THE MATTER. ORDER NO. 4, AS AMENDED, PROMULGATED BY THE SECRETARY OF AGRICULTURE, BECAME EFFECTIVE AUGUST 1, 1937. TWENTY-FIVE DAYS FROM THIS DATE THE FIRST PAYMENT UNDER THE ORDER WAS DUE THE MARKETING ADMINISTRATOR OF THE BOSTON AREA. ON THE TWENTY-FIFTH DAY FOLLOWING THE EFFECTIVE DATE OF THE SAID ORDER, SUPRA, AN EX PARTE INJUNCTION WAS GRANTED IN THE SUPERIOR COURT OF MAINE AGAINST H. P. HOOD AND SONS, INC., RESTRAINING SAID FIRM FROM PAYING ANY MONEY TO THE MARKETING ADMINISTRATOR. IN THIS PROCEEDING THE MARKETING ADMINISTRATOR WAS MADE A PARTY DEFENDANT, BUT NO SERVICE WAS OBTAINED. THIS SUIT WAS BROUGHT BY ONE ALONZO P. RICHARDS, WHO IS NOT, IN FACT, A BONA FIDE PRODUCER OF MILK, BUT DOES, FROM TIME TO TIME, SELL A LITTLE MILK TO H. P. HOOD AND SONS, INC., AND IS ONE OF TWENTY THOUSAND PRODUCERS SUPPLYING MILK IN THE GREATER BOSTON AREA.

ON THE TWENTY-SIXTH DAY FROM THE EFFECTIVE DATE OF ORDER NO. 4, AS AMENDED, H. P. HOOD AND SONS, INC., FILED A PETITION WITH THE SECRETARY OF AGRICULTURE PRAYING THAT IT BE EXEMPTED FROM THE PROVISIONS OF SAID ORDER. A WEEK AFTER THE PETITION WAS FILED THE SECRETARY OF AGRICULTURE BROUGHT SUIT AGAINST H. P. HOOD AND SONS, INC., AND THIRTY OTHER MILK DISTRIBUTORS IN THE BOSTON MARKETING AREA, IN THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF MASSACHUSETTS, PRAYING FOR A TEMPORARY INJUNCTION RESTRAINING THESE DEFENDANTS FROM FURTHER VIOLATING ORDER NO. 4, AS AMENDED.

THE CASE WAS SET DOWN FOR A HEARING ON OCTOBER 29, 1937, AND DURING THE COURSE OF THE ARGUMENT THE HOOD COMPANY PLEADED THE EX PARTE INJUNCTION GRANTED IN THE MAINE COURT. THE COURT INQUIRED OF THE DEFENDANT'S COUNSEL WHAT ACTION HAD BEEN TAKEN TO VACATE THE EX PARTE INJUNCTION, AND MR. RUGG, COUNSEL FOR THE DEFENDANT HOOD COMPANY SAID THAT NOTHING HAD BEEN DONE. MR. RUGG WAS ALSO QUESTIONED AS TO WHETHER HE HAD EXHAUSTED ALL HIS REMEDIES IN THE MAINE CASE, AND HE STATED THAT HE HAD NOT DONE SO.

ON NOVEMBER 19, 1937, JUDGE SWEENEY, UNITED STATES DISTRICT JUDGE FOR THE DISTRICT OF MASSACHUSETTS, IN THE FACE OF THE MAINE INJUNCTION, GRANTED THE TEMPORARY INJUNCTION PRAYED FOR BY THE UNITED STATES, AND ORDERED ALL MONIES TO BE PAID TO THE MARKETING ADMINISTRATOR IN COMPLETE COMPLIANCE WITH ORDER NO. 4, AS AMENDED. JUDGE SWEENEY'S ORDER WAS FILED WITHIN A WEEK FROM THE TIME THE FINDINGS WERE MADE. SHORTLY THEREAFTER THE DEFENDANT HOOD COMPANY TOOK AN APPEAL FROM JUDGE SWEENEY'S TEMPORARY INJUNCTION TO JUDGE BINGHAM, SENIOR JUDGE OF THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT, AND ASKED THAT JUDGE SWEENEY'S ORDER BE VACATED ON TWO GROUNDS, IZ: FIRST, THAT THE FEDERAL ACT IN QUESTION WAS UNCONSTITUTIONAL, AND, SECOND, THAT THERE WAS AN INJUNCTION AGAINST THE APPELLANT IN THE MAINE COURT. JUDGE BINGHAM DID NOT CONSIDER THE STATE COURT INJUNCTION TO BE CONTROLLING, AND ORDERED THE MONIES TO BE PAID PARTLY TO THE MARKETING ADMINISTRATOR AND PARTLY TO THE COURT, PENDING A HEARING ON THE MERITS. IN OTHER WORDS, WHILE THE QUESTION OF THE CONSTITUTIONALITY OF THE ACT IS HELD IN ABEYANCE PENDING FURTHER PROCEEDINGS, THE ORDER OF JUDGE BINGHAM OF THE CIRCUIT COURT OF APPEALS AS TO PAYING OF MONIES SUPERSEDES THE MAINE COURT'S ORDER AND IN EFFECT NEGATIVES IT. IT IS UNDERSTOOD THAT THE CONSTITUTIONAL QUESTION WILL BE ARGUED BEFORE THE CIRCUIT COURT OF APPEALS WITHIN THE NEXT FEW WEEKS.

DURING THIS TIME THE SUPERIOR COURT OF MAINE HAD ORDERED A HEARING ON THE EX PARTE INJUNCTION WHICH HAD BEEN GRANTED AGAINST THE HOOD COMPANY. THE HOOD COMPANY ATTORNEYS WERE PRESENT, AND AFTER A FIVE MINUTE DISCUSSION WITH THE JUDGE, ASKED THAT THE TEMPORARY INJUNCTION BE CONTINUED AND THAT NO HEARING BE HELD AT THAT TIME. THE COURT CONTINUED THE INJUNCTION.

IN VIEW OF THE FOREGOING, IT WOULD APPEAR THAT THE APPLICATION AT THIS TIME OF YOUR DECISION OF OCTOBER 29, 1937, WOULD HAVE THE EFFECT OF SUPPORTING THE ORDER OF A STATE COURT AS AGAINST THE ORDER OF THE UNITED STATES CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT, WHICH, OF COURSE, IS A RESULT NOT INTENDED BY YOU. CONSEQUENTLY IT IS REQUESTED THAT THE QUESTIONS AS TO THE ACTION OF THE CONTRACTING OFFICER IN REJECTING THE BIDS OF H. P. HOOD AND SONS, INC., RAISED IN YOUR LETTERS REFERRED TO IN THE FIRST PARAGRAPH HEREIN, BE RECONSIDERED IN THE LIGHT OF THE LATER DEVELOPMENTS IN THIS MATTER.

THE CONTRACT PROVISION FOR COMPLIANCE WITH A.A.A., QUOTED FROM THE INVITATIONS FOR BIDS, WAS INTENDED AS A REQUIREMENT THAT CONTRACTORS SHOULD COMPLY WITH A PUBLIC LAW. H. P. HOOD AND SONS, INC., THE LOW BIDDER ADMITTED NONCOMPLIANCE WITH ORDER NO. 4, REGULATING THE HANDLING OF MILK IN THE BOSTON AREA, BUT EXPLAINED THAT SUCH NONCOMPLIANCE WAS DUE TO A TEMPORARY RESTRAINING ORDER OBTAINED BY ONE OF ITS CUSTOMERS IN THE SUPERIOR COURT OF THE STATE OF MAINE. AT THE TIME THE DECISION OF OCTOBER 29, 1937, WAS RENDERED, IT APPEARED FROM THE REPORTED FACTS THAT H. P. HOOD AND SONS, INC., WERE BEING PREVENTED FROM COMPLYING WITH ORDER NO. 4 BY THE TEMPORARY INJUNCTION GRANTED BY THE SUPERIOR COURT OF THE STATE OF MAINE; THAT EXCEPT FOR SUCH INJUNCTION, THE SAID HOOD AND SONS, INC., HAD NO DESIRE TO EVADE COMPLIANCE AND THERE WAS NOTHING TO SUGGEST COLLUSION OR BAD FAITH.

IT NOW APPEARS FROM FACTS STATED IN YOUR LETTER, SUPRA, THAT THE UNITED STATES HAS OBTAINED PRELIMINARY INJUNCTIONS AGAINST H. P. HOOD AND SONS., INC., AND THIRTY OTHER MILK DISTRIBUTORS IN THE BOSTON MARKETING AREA, IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, RESTRAINING THEM FROM FURTHER VIOLATING ORDER NO. 4, AS AMENDED. SEE UNITED STATES V. WHITING MILK CO., 21 F.SUPP. 321. IN THE COURSE OF PROCEEDINGS, HOOD AND COMPANY PLEADED THE INJUNCTION GRANTED BY THE STATE COURT IN MAINE AS A DEFENSE, BUT ADMITTED NOTHING HAD BEEN DONE TO HAVE IT VACATED. AS MODIFIED BY BINGHAM, SENIOR JUDGE OF THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT, THE PRELIMINARY INJUNCTION STILL IS IN EFFECT, THE INJUNCTION IN THE STATE COURT TO THE CONTRARY NOTWITHSTANDING.

IT HAS BEEN HELD THAT FAILURE OR REFUSAL TO COMPLY WITH PUBLIC LAW JUSTIFIES REJECTION OF A LOW BID OTHERWISE PROPERLY FOR ACCEPTANCE UNDER THE LAW. 15 COMP. GEN. 201. THE LEGALITY OF ORDER NO. 4, REGULATING THE HANDLING OF MILK IN THE BOSTON AREA HAS BEEN UPHELD. UNITED STATES V. DAVID BUTTRICK CO., 91 F./2D) 66, CERTIORARI DENIED, 82 L.ED. 103. SEE, ALSO, EDWARDS V. UNITED STATES, 91 F./2D) 767, AND UNITED STATES V. WHITTENBERG, 21 F.SUPP. 713. WHILE THE DECISION OF NOVEMBER 19, 1937, IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, UNITED STATES V. WHITING MILK CO., REMAINS IN EFFECT, AND IN THE ABSENCE OF DECISIONS TO THE CONTRARY BY COURTS OF SUPERIOR JURISDICTION, ORDER NO. 4, MAY BE ACCEPTED AS A PART OF THE PUBLIC LAW OF THE LAND, AND LOW BIDS FOR GOVERNMENT CONTRACTS SUBMITTED BY BIDDERS NOT IN COMPLIANCE THEREWITH MAY BE REJECTED WHERE THE INVITATION FOR BIDS ADVISED BIDDERS THAT SUCH COMPLIANCE WOULD BE MADE A CONDITION OF THE BIDDING AND OF ANY CONTRACT AWARDED THEREUNDER. IN VIEW OF THE FACTS AS THEY NOW APPEAR OF RECORD IN THIS OFFICE, NO FURTHER OBJECTION WILL BE MADE TO THE ACTION OF THE CONTRACTING OFFICER IN REJECTING THE BIDS OF H. P. HOOD AND SONS., INC., AND AWARDING CONTRACTS W 155-2M-7906 AND W 155 2M-7986 TO SHAWMUT DAIRY, INC., AND HERLIHY BROTHERS, INC., RESPECTIVELY.