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TO THE SECRETARY OF THE TREASURY: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 5. THE CONTRACTOR CONTENDS THAT IT WAS NOT BOUND BY THE PURPORTED RENEWAL OPTION. 1956) AND SINCE THE OPTION WAS NEVER BINDING BECAUSE CONTRARY TO SECTION 3709. THE CONTRACTOR AGREED TO REMOVE TRASH "FROM LOCATIONS ON THE GOVERNMENT-OWNED PROPERTY ON WHICH IS LOCATED THE MAIN TREASURY BUILDING (15TH AND PA. ONE OF THE PROVISIONS TYPED ON STANDARD FORM NO. 36 INCLUDED WITH THE INVITATION AND THE CONTRACT IS AS FOLLOWS: "THE TREASURY DEPARTMENT SHALL RESERVE THE RIGHT TO RENEW THIS CONTRACT ANNUALLY FOR 5-YEARS AT THE SUCCESSFUL BIDDER'S PRICE QUOTED ON THIS BID.'. IT APPEARS THAT THE SERVICE COVERED BY THE CONTRACT WAS RENDERED FROM APRIL 1.

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B-132187, OCT. 1, 1957

TO THE SECRETARY OF THE TREASURY:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 5, 1957, IN RESPONSE TO OUR LETTER OF JUNE 20, 1957, RELATIVE TO CONTRACT NO. TAS-55-12, DATED APRIL 1, 1955, WITH THE SQUARE DEAL TRUCKING COMPANY. YOU REQUEST A DECISION AS TO WHETHER THE CONTRACT WITH ITS RENEWAL OPTION REMAINS VALID THOUGH BREACHED BY THE CONTRACTOR. THE CONTRACTOR CONTENDS THAT IT WAS NOT BOUND BY THE PURPORTED RENEWAL OPTION, SINCE THE CONTRACT, INCLUDING THE OPTION, EXPIRED AT THE END OF ITS FIRST YEAR (MARCH 31, 1956) AND SINCE THE OPTION WAS NEVER BINDING BECAUSE CONTRARY TO SECTION 3709, REVISED STATUTES (41 U.S.C. 5), REQUIRING ADVERTISING, AND CONTRARY TO THE REQUIREMENT OF 31 U.S.C. 665, THAT NO OFFICER OF THE GOVERNMENT SHALL INVOLVE IT IN ANY OBLIGATION FOR PAYMENT OF MONEY IN ADVANCE OF APPROPRIATIONS.

BY THE TERMS OF THE CONTRACT, THE CONTRACTOR AGREED TO REMOVE TRASH "FROM LOCATIONS ON THE GOVERNMENT-OWNED PROPERTY ON WHICH IS LOCATED THE MAIN TREASURY BUILDING (15TH AND PA. AVE., N.W.) AND THE TREASURY ANNEX (PA. AVE. AND MADISON PLACE N.W.) FOR A PERIOD OF 12 MONTHS FROM DATE OF AWARD OF CONTRACT" AT A BASIC PRICE OF $200 PER MONTH FOR REMOVING COMBUSTIBLE TRASH AND $35 PER MONTH FOR REMOVING NONCOMBUSTIBLE TRASH. THE ONLY OTHER BID RECEIVED IN RESPONSE TO CIRCULAR LETTERS SENT TO TEN DEALERS QUOTED PRICES OF $255 AND $65 FOR REMOVING COMBUSTIBLE AND NONCOMBUSTIBLE TRASH, RESPECTIVELY.

ONE OF THE PROVISIONS TYPED ON STANDARD FORM NO. 36 INCLUDED WITH THE INVITATION AND THE CONTRACT IS AS FOLLOWS:

"THE TREASURY DEPARTMENT SHALL RESERVE THE RIGHT TO RENEW THIS CONTRACT ANNUALLY FOR 5-YEARS AT THE SUCCESSFUL BIDDER'S PRICE QUOTED ON THIS BID.'

IT APPEARS THAT THE SERVICE COVERED BY THE CONTRACT WAS RENDERED FROM APRIL 1, 1955 (THE DATE OF AWARD), TO MARCH 31, 1956 (THE END OF THE ORIGINALLY INTENDED CONTRACT PERIOD OF ONE YEAR), AND THEREAFTER THROUGH JUNE 30, 1957. IN YOUR LETTER OF AUGUST 5, 1957, IT IS STATED:

"IN OUR VIEW THE ORIGINAL TERM OF THIS CONTRACT, EXTENDING FROM APRIL 1, 1955 TO MARCH 31, 1956, PRESENTS THE ONLY REAL QUESTION IN THIS CASE. IS CONCEDED THAT THIS TERM WAS IMPROPER, AND THAT ON APRIL 1, 1955 THE DEPARTMENT COULD NOT VALIDLY CONTRACT FOR THE PERIOD FOLLOWING JUNE 30, 1955. HOWEVER, THE PARTIES HAVE LATER PUT THEMSELVES LAWFULLY UNDER THE CONTRACT IN THE FOLLOWING MANNER:

"/1) SHORTLY BEFORE THE END OF FISCAL YEAR 1956 THE DEPARTMENT, IN DEFERENCE TO STATUTORY REQUIREMENTS FOR ADVERTISING, INVESTIGATED EXISTING SOURCES OF SUPPLY, FOUND THAT THERE WAS ONLY ONE OTHER THAN SQUARE DEAL, AND ASCERTAINED THAT THE PRICE OF THAT OTHER WAS HIGHER THAN THAT PROVIDED BY THE CONTRACT. MR. ROBERT H. PERRY, ACTING CHIEF OF THE OFFICE SERVICES DIVISION, THEN WROTE SQUARE DEAL ON JUNE 8, 1956 AS FOLLOWS:

" "THIS IS TO ADVISE YOU THAT THE TREASURY WISHES TO RENEW FOR ANOTHER 12 MONTHS (BEGINNING JULY 1, 1956) CONTRACT NO. TAS-55-12 ENTERED INTO WITH YOUR COMPANY APRIL 1, 1955 * * *. THIS RENEWAL IS PURSUANT TO THE OPTION CONTAINED IN THE CONTRACT.'

"SQUARE DEAL ACCEPTED THIS ELECTION BY PERFORMING AND RECEIVING COMPENSATION UNDER CONTRACT NO. TAS-55-12 THROUGH ALL OF FISCAL YEAR 1957.

"/2) ON MAY 22, 1957 SQUARE DEAL WROTE TO THE TREASURY "CONCERNING THE POSSIBILITY OF RENEWING CONTRACT NO. TAS-55-12, FOR ANOTHER YEAR, BEGINNING JULY 1, 1957.' ALTHOUGH REFUSING TO AGREE TO RENEWAL, THE LETTER DID NOT IN ANY WAY INDICATE INVALIDITY IN THE CONTRACT. ON JUNE 5, 1957, MR. PERRY AGAIN WRITE TO SQUARE DEAL, SAYING IN PART THAT:

" "THIS LETTER IS TO ADVISE YOU THAT IT IS THE DEPARTMENT'S WISH TO RENEW FOR ANOTHER 12 MONTHS, BEGINNING JULY 1, 1957, CONTRACT NO. TAS 55-12 ENTERED INTO WITH YOUR COMPANY APRIL 1, 1955, COVERING THE REMOVAL OF COMBUSTIBLE AND NON-COMBUSTIBLE TRASH FROM THE TREASURY AND TREASURY ANNEX BUILDINGS. THIS RENEWAL IS PURSUANT TO THE OPTION CONTAINED IN THE CONTRACT.'"

IT IS STATED ALSO THAT A NEW CONTRACT WITH A DIFFERENT CONTRACTOR HAS BEEN ENTERED INTO FOR THE FISCAL YEAR 1958, BECAUSE OF THE REFUSAL OF SQUARE DEAL TRUCKING COMPANY TO ACCEPT RENEWAL OF THE CONTRACT.

THE ACTION OF THE CONTRACTOR IN PERFORMING THE SERVICES AND RECEIVING THE COMPENSATION CONTEMPLATED BY THE CONTRACT FROM THE TIME WHEN THE ORIGINAL VALID CONTRACT TERM ENDED TO JUNE 30, 1957, WITHOUT OBJECTION, PROPERLY MAY BE REGARDED AS VALIDATING THE CONTRACT INSOFAR AS THE CONTRACT WAS AUTHORIZED TO BE ENTERED INTO BY THE GOVERNMENT. WILLARD, SUTHERLAND AND COMPANY V. UNITED STATES, 262 U.S. 489. HOWEVER, THERE IS FOR CONSIDERATION THE QUESTION WHETHER THE CONTRACTOR WAS OBLIGATED TO CONTINUE RENDERING SERVICES UNDER THE CONTRACT THROUGH SUCCEEDING FISCAL YEARS--- IN OTHER WORDS, WHETHER THE PURPORTED OPTION WAS AUTHORIZED AND VALID.

IN 33 COMP. GEN. 90 IT WAS STATED:

"IT HAS BEEN HELD BY THIS OFFICE THAT IT IS NOT COMPATIBLE WITH THE INTENT OF SECTION 3709, REVISED STATUTES, AS AMENDED, TO EFFECT NEW CONTRACTS BY RENEWALS UNDER OPTION PROVISIONS WITHOUT OBTAINING COMPETITION FOR THE PERIOD OF THE RENEWAL. 20 COMP. GEN. 572; 19 ID. 980. IT HAS ALSO BEEN HELD, HOWEVER, THAT ADVERTISING IS NOT REQUIRED IN A CASE WHERE IT CAN OBVIOUSLY ACCOMPLISH NO USEFUL PURPOSE--- SEE 28 COMP. GEN. 470; AND, INASMUCH AS NO PARTICULAR FORM OF ADVERTISING IS REQUIRED BY THE STATUTE (15 OP.ATTY.GEN. 226), THIS OFFICE HAS A CERTAIN INSTANCES ACCEPTED PROPER SURVEYS OR INFORMAL SOLICITATIONS AS ADEQUATE COMPLIANCE WITH THE REQUIREMENT OF ADVERTISING. 16 COMP. GEN. 931. ALSO, SEE B- 105387, JANUARY 4, 1952.'

IN THE INSTANT MATTER, THE REPORTED INVESTIGATION OF EXISTING SOURCES OF SUPPLY MAY BE REGARDED, UNDER APPLICABLE DECISIONS OF OUR OFFICE, AS ADEQUATE COMPLIANCE WITH THE REQUIREMENT OF ADVERTISING.

THERE IS NOTED THE CONTRACTOR'S CONTENTION THAT THE USE OF THE OPTION VIOLATES THE PROVISION OF 31 U.S.C. 665 THAT NO OFFICER OF THE GOVERNMENT SHALL INVOLVE IT "IN ANY CONTRACT OR OTHER OBLIGATION, FOR THE PAYMENT OF MONEY FOR ANY PURPOSE, IN ADVANCE OF APPROPRIATIONS MADE FOR SUCH PURPOSE.' THE AUTOMATIC RENEWAL OF A CONTRACT WAS DISAPPROVED IN 28 COMP. GEN. 553. HOWEVER, IN CASE OF AN OPTION THERE IS NO OBLIGATION OF FUNDS PRIOR TO THE EXERCISE OF THE OPTION BY GOVERNMENT AGENTS. SEE 19 COMP. GEN. 980; 36 ID. 883. IN THE INSTANT MATTER, THE OPTION WAS EXERCISED ONLY AFTER APPROPRIATIONS HAD BEEN MADE FOR THE PERIOD INVOLVED.

FOR THE REASONS ABOVE INDICATED, IT IS CONCLUDED THAT THE EXERCISE OF THE OPTION IN THIS MATTER WAS VALID. THE QUESTION WHETHER ANY EXCESS COSTS ARE CHARGEABLE TO SQUARE DEAL TRUCKING COMPANY, INC., DEPENDS ON THE TERMS OF THE REPLACING CONTRACT--- WHICH IS NOT HERE AVAILABLE--- AS COMPARED WITH THE TERMS OF THE ORIGINAL CONTRACT.

IT IS BELIEVED THAT THE LANGUAGE OF THE OPTION SHOULD BE CONSTRUED AS PERMITTING A MAXIMUM CONTRACT PERIOD OF 5 YEARS. SINCE, AS SUGGESTED IN YOUR LETTER, THE ORIGINAL VALID CONTRACT PERIOD ENDED JUNE 30, 1955, THE MAXIMUM PERIOD PERMISSIBLE WOULD END JUNE 30, 1959.

AS REQUESTED, THE FILE TRANSMITTED WITH YOUR LETTER OF AUGUST 5, 1957, IS RETURNED HEREWITH.

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