B-33307, MAY 5, 1943, 22 COMP. GEN. 1018

B-33307, MAY 5, 1943, 22 COMP. GEN. 1018

CONTRACTS - AWARDING TO SMALL BUSINESS CONCERNS AT HIGHER PRICES SECTION 3 OF THE ACT OF JUNE 11, 1942, WHEREIN THE CONGRESS GIVES RECOGNITION TO THE FACT THAT IT MAY BE NECESSARY FOR THE GOVERNMENT, IN ORDER TO MOBILIZE THE NATION'S FULL PRODUCTIVE CAPACITY, TO PAY HIGHER PRICES FOR SUPPLIES PURCHASED FROM CONCERNS OPERATING SMALL PLANTS THAN IT PAYS TO CONCERNS OPERATING LARGE PLANTS, HAS REFERENCE TO AUTHORIZED NEGOTIATED CONTRACTS FOR THE PURCHASE OF SUPPLIES NECESSARY TO FACILITATE THE PROSECUTION OF THE WAR AND MAY NOT BE REGARDED AS AUTHORIZING, CONTRARY TO THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES, THE REJECTION OF OTHERWISE ACCEPTABLE LOW BIDS AND THE ACCEPTANCE OF HIGHER BIDS OF SMALL CONCERNS, WHERE THE PROVISIONS OF SAID SECTION 3709 OTHERWISE ARE APPLICABLE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF AGRICULTURE, MAY 5, 1943:

THERE HAS BEEN CONSIDERED YOUR LETTER OF MARCH 20, 1943, AS FOLLOWS:

THIS DEPARTMENT HAS BEFORE IT THE INTERPRETATION TO BE ACCORDED PUBLIC LAW 603, 77TH CONGRESS, 2ND SESSION (THE SMALLER WAR PLANTS CORPORATION ACT) WITH RESPECT TO ITS APPLICATION TO THE AWARDING OF CONTRACTS. WE ARE PARTICULARLY CONCERNED WITH THE EFFECT IN THIS RESPECT OF SECTION 3 OF THE ABOVE ACT, WHICH PROVIDES AS FOLLOWS:

"IN ANY CASE IN WHICH A SMALL BUSINESS CONCERN OR GROUP OF SUCH CONCERNS HAS BEEN CERTIFIED BY OR UNDER THE AUTHORITY OF THE CHAIRMAN OF THE WAR PRODUCTION BOARD TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO A SPECIFIC GOVERNMENT PROCUREMENT CONTRACT, THE SECRETARY OF WAR, THE SECRETARY OF THE NAVY, THE DIRECTOR OF THE PROCUREMENT DIVISION OF THE TREASURY, AND ALL OTHER OFFICERS OF THE GOVERNMENT HAVING PROCUREMENT POWERS ARE DIRECTED TO ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, AND ARE AUTHORIZED TO LET SUCH GOVERNMENT PROCUREMENT CONTRACT TO SUCH CONCERN OR GROUP OF CONCERNS WITHOUT REQUIRING IT TO MEET ANY OTHER REQUIREMENTS WITH RESPECT TO CAPACITY AND CREDIT. THE CONGRESS HEREBY RECOGNIZES THE FACT THAT BUSINESS CONCERNS OPERATING SMALL PLANTS ARE FREQUENTLY UNABLE TO PRODUCE CERTAIN ARTICLES AT AS LOW A PER UNIT COST AS BUSINESS CONCERNS OPERATING LARGE PLANTS AND THAT, AS A CONSEQUENCE OF SUCH FACT, IN ORDER TO MOBILIZE THE NATION'S FULL PRODUCTIVE CAPACITY, INCLUDING BOTH LARGE AND SMALL PLANTS, IT MAY BE NECESSARY FOR THE GOVERNMENT TO PAY A HIGHER PER UNIT PRICE FOR SUCH ARTICLES TO BUSINESS CONCERNS OPERATING SMALL PLANTS THAN IT PAYS TO BUSINESS CONCERNS OPERATING LARGE ANTS.'

IT WOULD APPEAR TO THIS DEPARTMENT THAT NOTHING IN THE ABOVE ACT RELIEVES US FROM THE NECESSITY OF ADVERTISING FOR BIDS IN THE REGULAR MANNER. HOWEVER, IN A CASE WHERE BIDS HAVE BEEN ADVERTISED FOR AND OBTAINED BY US IN THE REGULAR MANNER, WE RESPECTFULLY REQUEST YOUR OPINION AS TO WHETHER SECTION 3 OF THE ABOVE ACT CONSTITUTES SUFFICIENT WARRANT FOR THIS DEPARTMENT, EITHER ON ITS OWN INITIATIVE WITH OR WITHOUT THE SPECIFIC APPROVAL OF THE CHAIRMAN OF THE WAR PRODUCTION BOARD, OR UNDER THE DIRECTION OF THE CHAIRMAN OF THE WAR PRODUCTION BOARD, TO---

1. AWARD ALL OR PART OF THE CONTRACT TO A SMALL BUSINESS CONCERN OR GROUP WHICH HAS RESPONDED TO THE INVITATION FOR BIDS AND WHICH IS NOT THE LOWEST RESPONSIVE BIDDER, BUT WHICH HAS BEEN CERTIFIED BY THE CHAIRMAN OF THE WAR PRODUCTION BOARD UNDER THE ABOVE-QUOTED SECTION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO THE SPECIFIC CONTRACT; OR

2. AWARD ALL OR PART OF THE CONTRACT TO A SMALL BUSINESS CONCERN OR GROUP WHICH IS A STRANGER TO THE NEGOTIATIONS, BUT WHICH HAS BEEN CERTIFIED BY THE CHAIRMAN OF THE WAR PRODUCTION BOARD UNDER THE ABOVE QUOTED SECTION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO THE SPECIFIC CONTRACT.

THIS OFFICE HAS HELD THAT UNDER EXPRESS AUTHORITY TO NEGOTIATE CONTRACTS WITHOUT ADVERTISING, AN ADMINISTRATIVE ELECTION TO ADVERTISE, RATHER THAN TO NEGOTIATE WITH A SINGLE CONTRACTOR, DOES NOT NECESSARILY REQUIRE MAKING THE AWARD TO THE LOWEST BIDDER; AND THAT SINCE ALL BIDS MAY BE REJECTED AND A CONTRACT NEGOTIATED WITH ANY ONE OF THE BIDDERS OR WITH A NONBIDDER, ON THE TERMS ADVERTISED OR ON MODIFIED TERMS, WITHIN THE AUTHORITY TO NEGOTIATE CONTRACTS WITHOUT ADVERTISING, THERE IS NO LEGAL OBJECTION TO THE REJECTION OF THE BIDS OF ONE OR MORE LOWER BIDDERS AND THE AWARDING OF THE CONTRACT TO A HIGHER BIDDER CONSISTENTLY WITH THE PRINCIPLES WHICH PROPERLY MAY BE ADMINISTRATIVELY APPLIED IN THE NEGOTIATION OF CONTRACTS WITHOUT ADVERTISING. 20 COMP. GEN. 194. IN THIS CONNECTION IT IS NOTED THAT THE SECRETARY OF AGRICULTURE HAS BEEN AUTHORIZED, IN ORDER TO FACILITATE THE PROSECUTION OF THE WAR, TO ENTER INTO CONTRACTS "WITHOUT REGARD TO THE PROVISIONS OF LAW RELATING TO THE MAKING, PERFORMANCE, AMENDMENT, OR MODIFICATION OF CONTRACTS.' SEE EXECUTIVE ORDERS NOS. 9023 AND 9001, DATED JANUARY 14, 1942, AND DECEMBER 27, 1941, RESPECTIVELY, AND THE FIRST WAR POWERS ACT, 1941, 55 STAT. 838. THE TWO QUESTIONS RAISED IN YOUR LETTER OF MARCH 20, 1943, WOULD REQUIRE AN AFFIRMATIVE ANSWER, OF COURSE, WITH RESPECT TO CONTRACTS TO BE AWARDED BY VIRTUE OF THAT AUTHORITY. IT IS UNDERSTOOD FROM YOUR LETTER, HOWEVER, THAT THE QUESTIONS PRESENTED HAVE ARISEN IN CONNECTION WITH THE NORMAL PURCHASING ACTIVITIES OF THE DEPARTMENT OF AGRICULTURE WHICH ARE SUBJECT TO THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES.

SECTION 3709, REVISED STATUTES, REQUIRES, GENERALLY, THAT THERE BE ADVERTISING FOR COMPETITIVE BIDS UNDER INVITATIONS SETTING FORTH THE GOVERNMENT'S NEEDS, AND THAT THE CONTRACT BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER--- EXCEPT IN CERTAIN CASES WHERE AN ELEMENT OTHER THAN PRICE IS FOR CONSIDERATION IN DETERMINING WHICH BID IS MOST ADVANTAGEOUS TO THE GOVERNMENT.

I FIND NOTHING IN SECTION 3 OF PUBLIC LAW 603, SUPRA, WHICH EXPRESSLY OR BY NECESSARY IMPLICATION AUTHORIZES ACCEPTANCE OF OTHER THAN THE LOWEST RESPONSIVE BID IN CASES TO WHICH THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES, APPLY, NOR IS THERE ANYTHING THEREIN WHICH REASONABLY MAY BE REGARDED AS REPEALING, SUSPENDING, OR MODIFYING THE REQUIREMENTS OF SAID SECTION 3709. THE PROVISIONS OF SECTION 3, PUBLIC LAW 603, 56 STAT. 352, RELATE PRIMARILY TO THOSE AGENCIES OF THE GOVERNMENT SPECIFICALLY MENTIONED THEREIN, WHICH ARE THE LARGE PURCHASERS OF MATERIAL FOR THE PROSECUTION OF THE WAR AND WHICH ARE AND HAVE BEEN MAKING SUCH PURCHASES UNDER THE NEGOTIATING AUTHORITY HERETOFORE CONFERRED UPON THEM. THE FIRST PART OF SECTION 3 MAKES THE CERTIFICATION BY OR UNDER THE AUTHORITY OF THE CHAIRMAN, WAR PRODUCTION BOARD, AS TO THE CAPACITY AND CREDIT OF A SMALL BUSINESS OR CONCERN CONCLUSIVE UPON GOVERNMENT PURCHASING OFFICERS AND SUCH OFFICERS ARE AUTHORIZED TO LET THE PARTICULAR CONTRACT TO THE SMALL BUSINESS OR CONCERN WITHOUT REQUIRING IT TO MEET ANY OTHER REQUIREMENTS WITH RESPECT TO CAPACITY AND CREDIT. BUT THIS AUTHORITY TO LET THE CONTRACT RELATES ONLY TO THE CAPACITY AND CREDIT OF THE CONCERN, IT DOES NOT CONFER AUTHORITY TO ENTER INTO CONTRACTS OTHERWISE PROHIBITED OR RESTRICTED, AND IT HAD FOR ITS SOLE PURPOSE THE OBJECT OF PREVENTING THE VARIOUS PROCUREMENT AGENCIES FROM SEPARATELY REQUIRING SMALL CONCERNS, AS A CONDITION PRECEDENT TO BEING CONSIDERED FOR AWARD OF CONTRACTS, TO SUBMIT VOLUMINOUS DATA TO THE VARIOUS AGENCIES AS TO CAPACITY AND CREDIT. IN FACT, THE FIRST PART OF SAID SECTION 3 IS A RESTRICTION, RATHER THAN AN ENLARGEMENT, OF THE AUTHORITY OF CONTRACTING OFFICERS.

THE LAST PART OF SECTION 3 IS A RECOGNITION OF THE PURCHASING SITUATION EXISTING WITH RESPECT TO SMALL CONCERNS AND IS AN EXPRESSION OF THE POLICY OF THE CONGRESS WITH THE EVIDENT OBJECT OF ENCOURAGING CONTRACTING WITH SMALL FIRMS. BUT IT IS NOT A MANDATORY PROVISION AND THE MERE STATEMENT THAT "IT MAY BE NECESSARY FOR THE GOVERNMENT TO PAY A HIGHER PER UNIT PRICE FOR SUCH ARTICLES TO BUSINESS CONCERNS OPERATING SMALL PLANTS THAN IT PAYS TO BUSINESS CONCERNS OPERATING LARGE PLANTS" MAY NOT BE REGARDED AS AUTHORIZING REJECTION OF OTHERWISE ACCEPTABLE LOW BIDS AND ACCEPTANCE OF HIGHER BIDS OF SMALL CONCERNS IN THOSE CASES IN WHICH ADVERTISING FOR BIDS WAS AND IS REQUIRED BY VIRTUE OF SECTION 3709, REVISED STATUTES.

IN THE HEARINGS BEFORE THE COMMITTEES OF CONGRESS WHICH CONSIDERED THE BILL ( PUBLIC LAW 603) AND ON THE FLOORS OF BOTH HOUSES OF CONGRESS, IT WAS BROUGHT OUT SEVERAL TIMES THAT SECTION 3 THEREOF DID NOT CONFER NEW AUTHORITY, THAT SUCH AUTHORITY ALREADY EXISTED, BUT THAT THE SECTION WAS A RESTATEMENT OF THE POLICY OF THE CONGRESS, AS EXPRESSED IN OTHER LEGISLATION, AND A CONGRESSIONAL APPROVAL OF CERTAIN AUTHORITY CONFERRED BY EXECUTIVE ORDER. THE AUTHORITY REFERRED TO MAY BE FOUND, OF COURSE, IN RECENT WARTIME LEGISLATION AND EXECUTIVE ORDERS ISSUED PURSUANT THERETO, PARTICULARLY THE FIRST WAR POWERS ACT, 1941, 55 STAT. 838, AND EXECUTIVE ORDERS NOS. 9001, 9024 AND 9040, DATED DECEMBER 27, 1941, JANUARY 16, 1942, AND JANUARY 24, 1942, RESPECTIVELY. ON AT LEAST ONE OCCASION THE BILL APPEARS TO HAVE BEEN ATTACKED ON THE FLOOR OF THE HOUSE BY A MEMBER OF CONGRESS BECAUSE IT DID NOT PURPORT TO EXTEND THE EXISTING AUTHORITY TO NEGOTIATE CONTRACTS.

ACCORDINGLY, BOTH THE QUESTIONS PRESENTED IN YOUR LETTER ARE ANSWERED IN THE NEGATIVE INSOFAR AS THEY RELATE TO PROCUREMENTS OTHERWISE SUBJECT TO THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES.