B-7681, DECEMBER 29, 1939, 19 COMP. GEN. 614

B-7681, DECEMBER 29, 1939, 19 COMP. GEN. 614

ADVERTISING - BIDS - REJECTION - PRICE UNCERTAINTIES RESULTING FROM STATE PRICE-FIXING ORDERS BIDS FOR FURNISHING SUPPLIES TO THE GOVERNMENT WHICH ARE SO QUALIFIED AS TO RENDER INDEFINITE THE CONTRACT PRICE TO BE PAID SHOULD BE REJECTED FOR UNCERTAINTY. BIDS FOR FURNISHING CREAM TO A VETERANS' ADMINISTRATION FACILITY WHICH ARE QUALIFIED, IN ORDER TO CONFORM TO AN ORDER OF A STATE MILK CONTROL BOARD, BY RECITING THAT THE BID PRICES ARE NOT BELOW THE MINIMUM PRICES FIXED BY SAID BOARD AND PROVIDING THAT THE CONTRACT PRICES WILL BE INCREASED IN ACCORDANCE WITH ANY INCREASE IN SAID MINIMUM PRICES DURING THE CONTRACT PERIOD, SHOULD BE REJECTED NOT ONLY BECAUSE THEY ARE UNCERTAIN, AND DO NOT CONFORM TO THE ADVERTISED SPECIFICATIONS, BUT BECAUSE THEY INCLUDE STIPULATIONS REPUGNANT TO STATUTORY REQUIREMENTS OF THE FEDERAL GOVERNMENT AND IN DEROGATION OF ITS RIGHTS IN CONTRACTING FOR SUPPLIES.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, DECEMBER 29, 1939:

I HAVE YOUR LETTER OF DECEMBER 19, 1939, WITH ENCLOSURES, AS FOLLOWS:

THE VETERANS' ADMINISTRATION FACILITY, LYONS, NEW JERSEY, UNDER DATE OF DECEMBER 8, 1939, OPENED BIDS FOR SUPPLYING CREAM TO THAT FACILITY DURING THE PERIOD DECEMBER 15, 1939, TO MARCH 31, 1940, AND AN ABSTRACT OF THE BIDS FOLLOWS:

INTERNATIONAL MILK CO., INC., $1.10 PER GALLON.

SCHMALZ DAIRY PRODUCTS, INC., $1.10 PER GALLON.

CREAM TOP FARMS, INC., $1.196 PER GALLON.

BORDEN'S FARM PRODUCTS, $1.224 PER GALLON.

THE INTERNATIONAL MILK CO., INC., INCLUDED IN ITS BID THE FOLLOWING CONDITION:

"ALL PRICES HEREIN CONTAINED ARE NOT BELOW THE MINIMUM PRICES FIXED BY THE OFFICIAL ORDERS OF THE MILK CONTROL BOARD OF THE STATE OF NEW JERSEY APPLYING THERETO. SHOULD SAID MINIMUM PRICES BE INCREASED DURING THE PERIOD OF THIS AGREEMENT, DELIVERIES MADE DURING THE PERIOD OF SUCH INCREASED PRICES SHALL BE AT PRICES NOT BELOW THE MINIMUM PRICES SO FIXED IN THE ORDERS OF THE BOARD AND APPLICABLE THERETO.'

SCHMALZ DAIRY PRODUCTS, INC., INCLUDED IN ITS BID THE FOLLOWING CONDITION:

"ALL PRICES HEREIN CONTAINED ARE NOT BELOW THE MINIMUM PRICES FIXED BY THE OFFICIAL ORDERS OF THE MILK CONTROL BOARD OF THE STATE OF NEW JERSEY APPLYING THERETO. SHOULD SAID MINIMUM PRICES BE INCREASED DURING THE PERIOD OF THIS AGREEMENT, DELIVERIES MADE DURING THE PERIOD OF SUCH INCREASED PRICES SHALL BE AT THE PRICES NOT BELOW THE MINIMUM PRICES SO FIXED IN THE ORDERS OF THE BOARD AND APPLICABLE THERETO.

"SHOULD SAID MINIMUM PRICES BE DECREASED DURING THE PERIOD OF THIS AGREEMENT, DELIVERIES MADE DURING THE PERIOD OF SUCH DECREASED PRICES SHALL BE AT THE MINIMUM PRICES SO FIXED IN THE ORDERS OF THE BOARD AND APPLICABLE THERETO.'

THE INTERNATIONAL MILK CO., INC., AND SCHMALZ DAIRY PRODUCTS, INC., NO DOUBT QUALIFIED THEIR BIDS IN THE MANNER INDICATED BECAUSE OF THE FOLLOWING OFFICIAL ORDER ISSUED BY THE MILK CONTROL BOARD, STATE OF NEW JERSEY, UNDER DATE OF NOVEMBER 25, 1939:

"BY VIRTUE OF AUTHORITY VESTED IN THE MILK CONTROL BOARD BY CHAPTER 82, PAMPHLET LAWS OF 1939, AND MORE PARTICULARLY BUT NOT IN LIMITATION OF THE FOREGOING BY SECTIONS TEN (10) AND TWENTY (20) OF THE AFORESAID ACT AND THE BOARD HAVING FOUND AFTER A CAREFUL CONSIDERATION OF ALL THE FACTS APPEARING THAT IT IS NECESSARY TO PROMULGATE THIS ORDER TO CARRY OUT THE PURPOSES AND PROVISIONS OF THE LAW, IT IS HEREBY ORDERED.

"1. THE PROVISIONS OF THIS ORDER SHALL APPLY TO THE ENTIRE STATE OF NEW JERSEY.

"2. WHENEVER PROPOSALS, BIDS, OR CONTRACTS ARE MADE BY DEALERS, SUBDEALERS, OR STORES TO FURNISH MILK TO THE STATE, A COUNTY, A MUNICIPALITY, OR TO THE FEDERAL GOVERNMENT, OR ANY BRANCH OR AGENCY OF THE AFORESAID, OR TO ANY PERSON FOR A DEFINITE FIXED PERIOD, SAID PROPOSAL, BID, OR CONTRACT SHALL HAVE INCLUDED THEREIN A PROVISION OR CLAUSE PROVIDING THAT ALL QUOTATIONS AND PRICES ARE NOT BELOW THE MINIMUM PRICES FIXED BY THE ORDERS OF THE BOARD AND APPLICABLE THERETO, AND ARE SUBJECT TO INCREASES TO MEET THE MINIMUM-PRICE PROVISIONS OF THE SUBSEQUENT ORDERS OF THE BOARD APPLYING THERETO AT THE TIME OF DELIVERY AND THAT NO SALES WILL BE MADE BELOW SUCH MINIMUM PRICES.

"THIS CLAUSE OR PROVISION SHALL BE IN THE FOLLOWING LANGUAGE, OR SUCH AS IS EQUIVALENT THERETO:

"ALL PRICES HEREIN CONTAINED ARE NOT BELOW THE MINIMUM PRICES FIXED BY THE OFFICIAL ORDERS OF THE MILK CONTROL BOARD OF THE STATE OF NEW JERSEY APPLYING THERETO. SHOULD SAID MINIMUM PRICES BE INCREASED DURING THE PERIOD OF THIS AGREEMENT, DELIVERIES MADE DURING THE PERIOD OF SUCH INCREASED PRICES SHALL BE AT PRICES NOT BELOW THE MINIMUM PRICES SO FIXED IN THE ORDERS OF THE BOARD AND APPLICABLE THERETO.

"3. THIS ORDER SHALL TAKE EFFECT AT 12:01 A.M., EASTERN STANDARD TIME, FRIDAY, DECEMBER 1, 1939.'

THE DECISIONS OF YOUR OFFICE HAVE HELD UNIFORMLY THAT A BID SO QUALIFIED AS TO RENDER INDEFINITE THE PRICE TO BE PAID BY THE GOVERNMENT MUST BE REJECTED, AND IN CONSONANCE THEREWITH THE VETERANS' ADMINISTRATION ORDINARILY WOULD REJECT THE BIDS OF THE INTERNATIONAL MILK CO., INC. AND SCHMALZ DAIRY PRODUCTS, INC., AND ACCEPT THE LOWEST UNQUALIFIED BID, NAMELY, THAT OF CREAM TOP FARMS, INC.

HOWEVER, IT IS BELIEVED THAT THE CONDITIONS OBTAINING IN THE STATE OF NEW JERSEY, UNDER WHICH THE MILK CONTROL BOARD, BY VIRTUE OF AUTHORITY VESTED IN IT BY THE LAWS OF NEW JERSEY, MAY DICTATE TO BIDDERS THE MANNER IN WHICH THEY SHALL QUALIFY THEIR BIDS FOR THE PURPOSE OF MAINTAINING MINIMUM PRICES FIXED BY THE MILK CONTROL BOARD, WARRANT, IN THE INTEREST OF ECONOMY, THE ESTABLISHMENT OF A POLICY WHICH WILL PERMIT FAVORABLE CONSIDERATION OF BIDS IN WHICH THERE HAVE BEEN INCORPORATED PROVISIONS OF THE KIND QUOTED, SUPRA.

IT WILL BE APPRECIATED IF YOU WILL ADVISE AT AN EARLY DATE WHETHER THE BID OF SCHMALZ DAIRY PRODUCTS, INC., WHICH PROVIDES FOR AN INCREASE OR DECREASE IN THE PRICE QUOTED, MAY BE FAVORABLY CONSIDERED, OR WHETHER, IF IT BE DECIDED TO LET A CONTRACT, THE UNQUALIFIED BID OF CREAM TOP FARMS, INC., MUST BE ACCEPTED.

THE BIDS AND THE OFFICIAL ORDER ISSUED BY THE MILK CONTROL BOARD UNDER DATE OF NOVEMBER 25, 1939, WHICH YOU ARE REQUESTED TO RETURN WITH YOUR REPLY, ARE ENCLOSED.

AS YOU STATE, THE DECISIONS OF THIS OFFICE HAVE BEEN TO THE EFFECT THAT BIDS SO QUALIFIED AS TO RENDER INDEFINITE THE CONTRACT PRICE TO BE PAID ARE FOR REJECTION FOR UNCERTAINTY; AND THE FACTS HERE PRESENTED WOULD NOT APPEAR TO AFFORD ANY VALID REASON FOR ABROGATION OF THE RULE HERE. ALSO, IT IS EQUALLY TRUE AND APPARENT IN THIS CASE THAT A CONTRACT AWARDED ON A BID AS QUALIFIED BY THE LOW BIDDERS WOULD NOT BE THE CONTRACT OFFERED TO ALL BIDDERS. 19 COMP. GEN. 450, AND CITED DECISIONS.

BUT IN ADDITION TO THESE FACTORS, THERE IS FOR CONSIDERATION THE APPARENT PURPOSE AND NECESSARY AND IMMEDIATE EFFECT OF THE ORDER OF THE NEW JERSEY MILK CONTROL BOARD IN QUESTION AS APPLIED TO CONTRACTS OF THE FEDERAL GOVERNMENT.

OFFICIAL ORDER NO. 39-28, ISSUED BY THE NEW JERSEY MILK CONTROL BOARD NOVEMBER 25, 1939, EFFECTIVE DECEMBER 1, 1939, QUOTED IN YOUR SUBMISSION, PROVIDES IN ESSENCE, SO FAR AS HERE PERTINENT, AS FOLLOWS:

WHENEVER PROPOSALS, BIDS, OR CONTRACTS ARE MADE BY DEALERS, SUBDEALERS, OR STORES TO FURNISH MILK TO * * * THE FEDERAL GOVERNMENT, OR ANY BRANCH OR AGENCY OF THE AFORESAID * * * FOR A DEFINITE FIXED PERIOD, SAID PROPOSAL, BID, OR CONTRACT SHALL HAVE INCLUDED THEREIN A PROVISION OR CLAUSE PROVIDING THAT ALL QUOTATIONS AND PRICES ARE NOT BELOW THE MINIMUM PRICES FIXED BY THE ORDERS OF THE BOARD AND APPLICABLE THERETO AND ARE SUBJECT TO INCREASES TO MEET THE MINIMUM PRICE PROVISIONS OF THE SUBSEQUENT ORDERS OF THE BOARD APPLYING THERETO AT THE TIME OF DELIVERY AND THAT NO SALES WILL BE MADE BELOW SUCH MINIMUM PRICES.

THUS STATED, THE ORDER IMMEDIATELY APPEARS AS AN UNDERTAKING BY THE MILK CONTROL BOARD OF THE STATE OF NEW JERSEY NOT ONLY TO DICTATE THE TERMS UPON WHICH THE FEDERAL GOVERNMENT MAY CONTRACT FOR MILK AND MILK PRODUCTS WITHIN THE STATE OF NEW JERSEY AND TO PRESCRIBE THE PROVISIONS TO BE EMBODIED IN CONTRACTS THEREFOR BUT TO CONTROL THE COURSE OF SUCH CONTRACTS DURING THEIR EXISTENCE AND, AT ITS OWN WILL, TO INCREASE THE PRICES WHICH THE GOVERNMENT SHALL PAY FOR MILK AND MILK PRODUCTS UNDER A PREVAILING CONTRACT, WITHOUT CONSIDERATION OF THE MOTIVE PROMPTING THE BOARD IN ANY POSSIBLE INCREASE IN PRICES ORDERED BY IT, NOTWITHSTANDING THE REQUIREMENTS OF FEDERAL STATUTES RELATIVE TO CONTRACTS FOR PURCHASES FOR GOVERNMENT NEEDS.

THERE WOULD APPEAR TO BE NO LEGAL AUTHORITY FOR SUCH UNDERTAKING ON THE PART OF THE STATE OF NEW JERSEY EITHER BY LEGISLATION OR BY MEANS OF REGULATIONS ISSUED UNDER COLOR OR COVER OF AUTHORITY PURPORTED TO BE CONFERRED UPON THE SAID BOARD BY STATE STATUTE. IT HAS BEEN HELD BY THE SUPREME COURT OF THE UNITED STATES THAT ONE STATE HAS NO POWER TO PROJECT ITS LEGISLATION INTO ANOTHER STATE BY REGULATING PRICES TO BE PAID IN THAT STATE FOR MILK ACQUIRED THERE, AND THAT SUCH AN UNDERTAKING CANNOT BE UPHELD AS A VALID EXERCISE BY THE STATE OF ITS INTERNAL POLICE POWER, BALDWIN V. SEELIG, 294 U.S. 511, 522-523, AND IT WOULD APPEAR TO BE EQUALLY TRUE THAT A STATE HAS NO POWER TO "PROJECT ITS LEGISLATION" INTO THE REALM OF FEDERAL GOVERNMENT CONTRACTING OR, DIRECTLY OR INDIRECTLY, TO IMPOSE RESTRICTIONS UPON FEDERAL GOVERNMENT CONTRACTING FOR NECESSARY FOODSTUFFS WITHIN ITS BORDERS IN THE FACE OF FEDERAL STATUTES WHICH PRESCRIBE AND MUST CONTROL THE BASIS OF CONTRACTING FOR THE NEEDS OF THE GOVERNMENT. 16 COMP. GEN. 348; ID. 484; 17 ID. 287, AND CASES CITED; A- 89192, JANUARY 30, 1939.

HENCE, IT MUST FOLLOW THAT A BID QUALIFIED BY THE INCLUSION OF THE PROVISION PRESCRIBED IN SUCH ORDER NOT ONLY IS NOT RESPONSIVE TO THE ADVERTISED SPECIFICATIONS, AND UNACCEPTABLE FOR UNCERTAINTY, BUT IS LIKEWISE OBJECTIONABLE AS INCLUDING STIPULATIONS REPUGNANT TO STATUTORY REQUIREMENTS OF THE FEDERAL GOVERNMENT AND IN DEROGATION OF THE RIGHTS OF THE FEDERAL GOVERNMENT IN CONTRACTING FOR THE PURCHASE OF SUPPLIES. SEE PANHANDLE OIL COMPANY V. KNOX, 277 U.S. 218.

ACCORDINGLY, YOU ARE INFORMED THAT THE TWO LOWER BIDS LISTED IN YOUR SUBMISSION APPEAR TO BE PROPERLY FOR REJECTION FOR THE REASONS ASSIGNED HEREIN, AND AWARD ON THE LOWEST UNQUALIFIED BID IS AUTHORIZED IF IT BE ADMINISTRATIVELY DETERMINED TO BE TO THE INTERESTS OF THE GOVERNMENT TO LET A CONTRACT FOR CREAM FOR THE FACILITY AT LYONS AT THIS TIME.