B-140042, JANUARY 15, 1960, 39 COMP. GEN. 524

B-140042, JANUARY 15, 1960, 39 COMP. GEN. 524

BIDS - JOINT VENTURE - COMPETITION RESTRICTION - PRIOR SEPARATE CONTRACTS THE SUBMISSION OF BIDS BY TWO FIRMS AS A JOINT VENTURE, WHEN PREVIOUSLY THEY ACTED AS SUBCONTRACTOR WITH EACH OTHER IN PERFORMANCE OF SIMILAR CONTRACTS, INDICATES THAT THEY ARE ACTING TOGETHER AS A SINGLE ENTITY THEREBY ELIMINATING ANY POSSIBILITY OF ILLEGALITY IN CONNECTION WITH THEIR BIDS. IN THE ABSENCE OF EVIDENCE THAT THE ACTION OF TWO FIRMS IN THE SUBMISSION OF BIDS AS A JOINT VENTURE RESULTED IN A SUBSTANTIAL LESSENING OF COMPETITION OR TENDED TO CREATE A MONOPOLY, SUCH ACTION MAY NOT BE REGARDED AS AN IMPROPER DISCOURAGEMENT OF COMPETITION. A BID SUBMITTED BY A JOINT VENTURE FORMED SPECIFICALLY FOR THE PURPOSE OF BIDDING ON TWO GOVERNMENT INVITATIONS AND SIGNED BY AN OFFICER OF ONE OF THE FIRMS CONSTITUTES SUFFICIENT EVIDENCE OF THE AUTHORITY OF THE OFFICER TO SIGN THE BIDS ON BEHALF OF BOTH FIRMS. A CERTIFICATION ON A BID BY A JOINT VENTURE THAT IT WAS NOT VIOLATING ANY FEDERAL MILK MARKETING ORDER, WHEN THERE WAS PENDING AN ADMINISTRATIVE APPEAL ON A VIOLATION BY ONE OF THE FIRMS IN THE JOINT VENTURE, DOES NOT WARRANT CONCLUSION THAT AWARDS TO THE JOINT VENTURE ARE ILLEGAL IN VIEW OF A DETERMINATION BY THE CONTRACTING OFFICER AND THE PROCUREMENT AGENCY THAT IT DID NOT BELIEVE THERE WAS ANY VIOLATION BECAUSE DELIVERIES WERE TO BE MADE TO A DESTINATION NOT LOCATED IN THE PARTICULAR MILK MARKETING AREA.

TO ROBERT SHERIFFS MOSS, JANUARY 15, 1960:

REFERENCE IS MADE TO YOUR LETTERS OF JUNE 26, 1959, JULY 10, 1959, AND SEPTEMBER 18, 1959, RELATIVE TO THE PROTEST OF QUAKER MAID DAIRY PRODUCTS, INC., PHILADELPHIA, PENNSYLVANIA, AGAINST THE AWARDS OF CONTRACTS NOS. DA- 28-013-AI-2343 AND DA-28-013-AI-2435, DATED JUNE 29, 1959, TO THE STERLING DAVIS DAIRY, WRIGHTSTOWN, NEW JERSEY, AND RAINIER'S DAIRIES, BRIDGETON, NEW JERSEY, AS JOINT BIDDERS UNDER INVITATIONS FOR BIDS NOS. AI-28-013-59- 83 AND AI-28-013-59-84, ISSUED MAY 26, 1959, BY THE PURCHASING AND CONTRACTING OFFICE AT FORT DIX, NEW JERSEY.

THE INVITATIONS FOR BIDS WERE ISSUED FOR THE PURPOSE OF ENTERING INTO CONTRACTS FOR THE MEETING OF THE REQUIREMENTS OF FORT DIX AND THE MCGUIRE AIR FORCE BASE FOR MILK AND OTHER DAIRY PRODUCTS DURING THE FISCAL YEAR BEGINNING ON JULY 1, 1959, AND ENDING ON JUNE 30, 1960. IT WAS INTENDED THAT BIDDING ON A PORTION OF THE TOTAL REQUIREMENTS SHOULD BE RESTRICTED TO SMALL BUSINESS CONCERNS WHICH ACCOUNTS FOR THE FACT THAT MORE THAN ONE INVITATION FOR BIDS WAS ISSUED.

THE JOINT VENTURE OF STERLING DAVIS DAIRY AND RAINIER'S DAIRIES WAS THE SUCCESSFUL BIDDER ON ITEMS NOS. 8 AND 11 OF INVITATION NO. AI-28 013-59-83 AND ON ITEMS NOS. A, 4 AND 5 OF INVITATION NO. AI-28-013-59 84. THOSE ITEMS CALLED FOR DELIVERIES OF MILK ON FIBRE CONTAINERS AND THE ESTIMATED REQUIREMENTS WERE: 2,220,000 ONE-HALF PINTS OF MILK ON ORDERS REQUIRING ONLY TWO HOURS' NOTICE; AND QUANTITIES OF 15,468,000 ONE-HALF PINTS OF MILK, 31,809,720 ONE-HALF PINTS OF MILK, 1,230,000 QUARTS OF MILK AND 360,000 ONE-HALF GALLONS OF MILK WHICH WOULD BE REQUIRED FOR DELIVERY UNDER OTHER SPECIFIED CONDITIONS. THE BIDS RECEIVED ON THE PARTICULAR ITEMS OF THE TWO INVITATIONS WERE AS FOLLOWS:

CHART INVITATION NO. AI-28-013-59-83

ITEM 8 ITEM 11 STERLING DAVIS DAIRY AND RAINIER'S DAIRIES-----$0.05375 $0.04488 DURLING FARMS, WHITEHOUSE STATION, NEW JERSEY-- .065

.053 QUAKER MAID DAIRY PRODUCTS, INC---------------- ------- .047 REGIS MILK CO., NORFOLK VA-------------------- ------- .0489

CHART INVITATION NO. AI-28-013-59-84

ITEM A ITEM 4 ITEM 5 STERLING DAVIS DAIRY AND RAINIER'S DAIRIES---------- ---------$0.04488 $0.15289 $0.3049 LEHIGH VALLEY COOPERATIVE FARMERS, ALLENTOWN, PA ------------ .0478 .17 .336 QUAKER MAID DAIRY PRODUCTS, INC- - ------- .163 .326

BIDS RECEIVED IN RESPONSE TO THE TWO INVITATIONS WERE SCHEDULED FOR OPENING ON JUNE 15, 1959 (AT 2 P.M. EDST, FOR INVITATION NO. AI-28-013 59- 83 AND AT 2:30 P.M. EDST, FOR INVITATION NO. AI-28-013-59-84). THEIR STATED TERMS AND CONDITIONS INCLUDED PROVISIONS THAT BIDS SIGNED BY AN AGENT MUST BE ACCOMPANIED BY EVIDENCE OF HIS AUTHORITY AND THAT "THE CONTRACT WILL BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.' THE INVITATIONS ALSO INCORPORATED CERTAIN SPECIAL PROVISIONS, PARAGRAPH 7 OF WHICH DEALS WITH COMPLIANCE WITH THE AGRICULTURAL MARKETING AGREEMENT ACT OF 1937, AS AMENDED, AND INCLUDED AMONG THE VARIOUS PROVISIONS OF SECTIONS 601 THROUGH 674 OF TITLE 7, UNITED STATES CODE. PARAGRAPH 7 OF THE SPECIAL PROVISIONS SETS FORTH A CERTIFICATION THAT THE BIDDER IS COMPLYING WITH AND WILL CONTINUE TO COMPLY WILL ALL MARKETING AGREEMENTS, LICENSES AND ORDERS EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE, PERTAINING TO MILK OR ITS PRODUCTS AND APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THE CONTRACT FOR WHICH THE BID IS OFFERED. IT PROVIDES FOR THE FURNISHING OF A CERTIFICATE OF SUCH NATURE BY SUBCONTRACTORS AND FOR POSSIBLE DEFAULT TERMINATION ACTION "IF THE CONTRACTOR VIOLATES OR FAILS TO COMPLY WITH ANY OF THE FOREGOING REQUIREMENTS.' IT PROVIDES, FURTHER THAT "THE DETERMINATION OF THE SECRETARY OF AGRICULTURE AS TO THE FAILURE OF COMPLIANCE BY THE CONTRACTOR OR SUBCONTRACTOR TO WHICH THEY HAVE CERTIFIED OR AGREED SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES THERETO.'

THE BIDS OF THE JOINT VENTURE WERE DATED JUNE 15, 1959, AND SIGNED BY WILLIAM K. MCDANIEL AS " AUTHORIZED REPRESENTATIVE.' MR. MCDANIEL WAS AN OFFICER AND GENERAL MANAGER OF THE STERLING DAVIS DAIRY AND, APPROXIMATELY TWO HOURS BEFORE THE SCHEDULED OPENING OF BIDS, THERE WAS SUBMITTED A SINGED COPY OF AN AGREEMENT DATED JUNE 12, 1959, BETWEEN THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES WHICH RELATED TO THE MATTER OF BIDDING ON CERTAIN OF THE ITEMS OF THE TWO INVITATIONS FOR BIDS.

IN CONNECTION WITH THE PROTEST OF QUAKER MAID DAIRY PRODUCTS, INC., THERE WAS FORWARDED WITH YOUR LETTER OF JUNE 26, 1959, A COPY OF A LETTER DATED JUNE 22, 1959, FROM THE LAW FIRM OF SHAPIRO, ROSENFELD, STALBERG AND COOK, PHILADELPHIA, PENNSYLVANIA, IN SUPPORT OF A PROTEST MADE IN A TELEGRAM FROM MR. SIGMUND TWERSKY, PRESIDENT OF QUAKER MAID DAIRY PRODUCTS, INC., TO THE PURCHASING AND CONTRACTING OFFICER. INFORMATION CONCERNING THE PROTEST WAS RECEIVED FROM THE DEPARTMENT OF THE ARMY AND ONE OF OUR REPRESENTATIVES DISCUSSED THE MATTER WITH YOU AND MR. TWERSKY SHORTLY AFTER RECEIPT OF THE DEPARTMENTAL REPORT.

MR. TWERSKY HAD CONTENDED THAT THE JOINT VENTURE BIDS WERE COLLUSIVE, UNREASONABLE, IN RESTRAINT OF TRADE, IN VIOLATION OF THE ANTITRUST STATUTES, RIGGED, ETC. THE CONTENTIONS WERE MADE IN THE LETTER DATED JUNE 22, 1959, FROM THE FIRM OF SHAPIRO, ROSENFELD, STALBERG AND COOK, THAT PAST PRACTICES OF THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES CONSTITUTED COLLUSIVE BIDDING; THAT THE JOINT BIDS WERE ILLEGAL UNDER GOVERNMENT PROCUREMENT LAW; THAT THEY WERE IMPROPERLY PREPARED IN THAT THEY WERE EXECUTED WITHOUT PROPER AUTHORIZATION; THAT THE JOINT VENTURE IS NOT FINANCIALLY RESPONSIBLE AS AN INDEPENDENT BUSINESS ENTITY, AND THAT THE JOINT VENTURE COULD NOT HAVE CERTIFIED THAT IT WAS IN COMPLIANCE WITH THE FEDERAL MILK MARKETING LAWS. THE RECORD ALSO SHOWS THAT A FIRM OF ATTORNEYS IN ALLENTOWN, PENNSYLVANIA, REPRESENTING LEHIGH VALLEY COOPERATIVE FARMERS, QUESTIONED THE AUTHORITY OF MR. MCDANIEL TO SIGN THE BID OF THE JOINT VENTURE UNDER INVITATION NO. AI-29-013-59-84.

IT WAS STATED IN THE LETTER OF JUNE 22, 1959, THAT FOR MANY YEARS THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES JOINED IN SUPPLYING MILK ITEMS TO FORT DIX EITHER AS SUBCONTRACTOR FOR EACH OTHER OR UNDER SOME OTHER ARRANGEMENT. INFORMATION WAS FURNISHED WITH RESPECT TO THE SEPARATE BIDS OF THE TWO CONCERNS FOR DELIVERIES OF MILK TO FORT DIX IN ONE-HALF PINT CONTAINERS DURING THE LAST THREE MONTHS OF THE YEAR 1956, THE FIRST SIX MONTHS OF THE YEAR 1957, THE FISCAL YEAR BEGINNING ON JULY 1, 1957, AND THE FISCAL YEAR BEGINNING ON JULY 1, 1958. ACCORDING TO THE DATA SET FORTH IN THE LETTER, THE BIDDING ON THE PARTICULAR ITEMS WAS AS FOLLOWS:

* * * * * (CHART OMITTED) * * * *

ATTENTION WAS INVITED TO THE RELATIVELY SLIGHT DIFFERENCE OF $0.00025 BETWEEN THE 1956 BIDS OF THE TWO COMPANIES, TO THE DIFFERENCE OF $0.0005 BETWEEN THEIR BIDS FOR THE FISCAL YEAR BEGINNING ON JULY 1, 1957 TO THE DIFFERENCES OF $0.0006 AND $0.0001 BETWEEN THE BID PRICES OF THE TWO CONCERNS ON MILK DELIVERIES IN GLASS AND FIBRE CONTAINERS FOR THE FISCAL YEAR BEGINNING ON JULY 1, 1958, AS TO WHICH NEITHER COMPANY WAS THE SUCCESSFUL BIDDER ON THE ITEMS INVOLVED. NOTHING WAS SAID WITH RESPECT TO THE DIFFERENCE OF $0.0045 BETWEEN THEIR BIDS FOR THE FIRST SIX MONTHS OF THE YEAR 1957. HOWEVER, IT WAS POINTED OUT THAT THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES WERE THE FIRST AND SECOND LOWEST BIDDERS FOR THE FIRST THREE PERIODS; THAT THE STERLING DAVIS DAIRY SUBMITTED THE LOWEST OF THE TWO BIDS FOR THE FIRST TWO PERIODS; THAT RAINIER'S DAIRIES SUBMITTED THE LOWEST OF THE TWO BIDS FOR THE THIRD PERIOD, AND THAT, WHILE NEITHER COMPANY WAS THE LOWEST BIDDER FOR THE FOURTH PERIOD, THE STERLING DAVIS DAIRY QUOTED PRICES WHICH WERE LOWER THAN THOSE QUOTED BY RAINIER'S DAIRIES.

IT WAS ARGUED THAT THE COMPANIES ALTERNATED IN SUBMITTING THE LOWER OF THE TWO BIDS AND THAT THE ONLY EXPLANATION FOR THE INCREASE IN THEIR BID PRICES FOR THE YEAR BEGINNING ON JULY 1, 1958, IS THE POSSIBILITY THAT THEY BELIEVED IN 1958 THAT COMPETITION WITH OTHER DEALERS HAD BEEN EFFECTIVELY DISCOURAGED. IT WAS STATED THAT UNDER SECTION 1-111.2 OF THE ARMED SERVICES PROCUREMENT REGULATION CERTAIN NONCOMPETITIVE PRACTICES ARE PROHIBITED AND THAT SOME OF THE PROHIBITED PRACTICES ARE COLLUSIVE BIDDING, FOLLOW-THE-LEADER PRICING, ROTATED BIDS, UNIFORM ESTIMATING SYSTEMS, SHARING OF BUSINESS AND IDENTICAL BIDS.

THE CONTRACTING OFFICER HAD RAISED CERTAIN QUESTIONS RESPECTING THE PROPRIETY OF MAKING AWARDS TO THE JOINT BIDDERS AND THE MATTER WAS EVENTUALLY SUBMITTED TO THE OFFICE OF THE JUDGE ADVOCATE GENERAL OF THE ARMY FOR AN ADVISORY OPINION. ON THE BASIS OF THE FACTS PRESENTED, ADVICE WAS FURNISHED TO THE EFFECT THAT IT WAS NOT BELIEVED THAT THE ALLIANCE OF THE TWO FIRMS CONSTITUTED SUCH AN UNDUE RESTRAINT OF TRADE THAT THE JOINT VENTURE BIDS MUST BE DISREGARDED; AND THAT, IN THE ABSENCE OF EVIDENCE TO THE CONTRARY, THE AGREEMENT OF THE JOINT VENTURES, TOGETHER WITH THE EXISTING EVIDENCE SHOWING THAT MR. WILLIAM K. MCDANIEL WAS THE SECRETARY OF ONE OF THE CORPORATIONS, WAS SUFFICIENT TO ESTABLISH THE PRIMA FACIE AUTHORITY OF THAT INDIVIDUAL TO SIGN THE BIDS ON BEHALF OF THE JOINT VENTURE.

SUBSEQUENTLY, HEADQUARTERS, U.S. ARMY TRAINING CENTER, INFANTRY, FORT DIX, NEW JERSEY, REPORTED BY MEMORANDUM OF JULY 14, 1959, THAT IT HAD NO EVIDENCE OF ANY FACTS, OTHER THAN AS ALLEGED IN THE LETTER OF JUNE 22, 1959, FROM SHAPIRO, ROSENFELD, STALBERG AND COOK, WHICH MIGHT TEND TO ESTABLISH POSSIBLE VIOLATION OF THE ANTITRUST LAWS BY THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES. IT WAS STATED THAT, WHILE THERE HAD BEEN IN THE PAST A PATTERN OF ROTATING BIDS AND AN APPARENT SHARING OF THE BUSINESS BY THE TWO CONCERNS, THIS HAS NOT RESULTED IN HIGHER COSTS TO THE GOVERNMENT AS THESE BIDDERS HAVE BEEN CONSISTENTLY LOW WITH THE EXCEPTION OF THE YEAR 1958. IRRESPECTIVE OF THE PAST ACTIVITIES OF THE TWO CONCERNS, IT IS OUR OPINION THAT BY SUBMITTING BIDS AS A JOINT VENTURE THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES ELIMINATED ANY POSSIBILITY OF ILLEGALITY IN CONNECTION WITH THEIR BIDS SINCE THEY WERE THEN ACTING IN CONCERT AS A SINGLE ENTITY FOR THE VERY PURPOSE OF BIDDING ON AND PERFORMING THE CONTRACTS. MOREOVER, IT IS QUESTIONABLE WHETHER THERE WAS ANY COLLUSIVE BIDDING BY THE TWO CONCERNS UNDER THE PREVIOUS ADVERTISEMENTS, ALTHOUGH THEY MAY HAVE SUBCONTRACTED WITH EACH OTHER FROM TIME TO TIME IN CONNECTION WITH THE PERFORMANCE OF THEIR GOVERNMENT CONTRACTS.

ASIDE FROM THE QUESTION AS TO THE APPLICABILITY OF THE FEDERAL ANTITRUST STATUTES TO PROPOSED DELIVERIES OF MILK WITHIN THE STATE OF NEW JERSEY BY DAIRIES LOCATED WITHIN THAT STATE, IT APPEARS THAT, IN ORDER TO SUSTAIN A CLAIM THAT A PARTICULAR AGREEMENT IS IN VIOLATION OF THE ANTITRUST STATUTES, IT MUST BE DEMONSTRATED THAT THE AGREEMENT EITHER RESULTED IN A SUBSTANTIAL LESSENING OF COMPETITION OR TENDED TO CREATE A MONOPOLY. THAT DOES NOT APPEAR TO HAVE BEEN THE SITUATION HERE AND, IN VIEW OF THE PRICE QUOTED BY JERSEY MAID FOR DELIVERY OF HALF-PINTS OF MILK TO FORT DIX DURING THE FISCAL YEAR BEGINNING ON JULY 1, 1957, THERE WOULD SEEM TO BE NO REASON TO SUGGEST THAT, AT THE TIME OF BIDDING ON THE FISCAL YEAR 1959 REQUIREMENTS, THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES BELIEVED THAT THEY HAD EFFECTIVELY DISCOURAGED COMPETITION.

THE ADVERTISING STATUTES DO NOT PROHIBIT SUBCONTRACTING OR THE CONSIDERATION OF BIDS BY TWO OR MORE PERSONS OR FIRMS AS JOINT VENTURERS; AND IT IS A GENERAL RULE THAT EACH OF SEVERAL JOINT VENTURES HAS THE POWER TO BIND THE OTHERS AND TO SUBJECT THEM TO LIABILITY TO THIRD PERSONS IN MATTERS WHICH ARE STRICTLY WITHIN THE SCOPE OF THE JOINT ENTERPRISE. SEE 30 AM. JUR. 980, JOINT ADVENTURERS, SECTION 55. THE FACT THAT THE JOINT VENTURE AGREEMENT IN THIS CASE RELATED SPECIFICALLY TO BIDDING ON ITEMS OF THE TWO INVITATIONS APPEARS, THEREFORE, TO HAVE CONSTITUTED SUFFICIENT EVIDENCE OF THE AUTHORITY OF MR. MCDANIEL, AS AN OFFICER OF THE STERLING DAVIS DAIRY, TO SIGN THE BIDS ON BEHALF OF BOTH THE STERLING DAVIS DAIRY AND RAINIER'S DAIRIES.

THERE HAS BEEN DEVELOPED CERTAIN INFORMATION WITH RESPECT TO THE CONTENTION THAT THE JOINT VENTURERS COULD NOT HAVE CERTIFIED THAT THEY WERE IN COMPLIANCE WITH THE FEDERAL MILK MARKETING LAWS. THE DEPARTMENT OF THE ARMY DID NOT ORIGINALLY REPORT ON THAT FEATURE OF THE PROTEST AND, IN THE COURSE OF THE CONFERENCE HELD IN OUR OFFICE WITH YOU AND MR. TWERSKY, IT WAS SUGGESTED THAT YOU SUBMIT EVIDENCE IN SUPPORT OF SUCH CONTENTION. THERE WAS FORWARDED WITH YOUR LETTER OF SEPTEMBER 18, 1959, A COPY OF AN OPINION OF THE UNITED STATES DISTRICT COURT, FILED JUNE 5, 1959, IN THE CASE OF UNITED STATES V. STERLING DAVIS DAIRY AND J. STERLING DAVIS, D/B/A STERLING DAVIS DAIRY, CIVIL ACTION 164-59. THE OPINION STATED THAT THE MOTION FOR SUMMARY JUDGMENT WOULD BE GRANTED "TO THE END THAT A MANDATORY INJUNCTION WILL ISSUE PURSUANT TO THE PRAYER OF THE COMPLAINT.' HOWEVER, WITH RESPECT TO THE CONTENTION OF THE DEFENDANTS THAT THEY WERE NOT IN VIOLATION OF FEDERAL MILK MARKETING ORDER NO. 27, THE COURT SUSTAINED THE GOVERNMENT'S POSITION THAT, ONLY AFTER A PROCEEDING UNDER SECTION 15 (A) OF THE AGRICULTURAL MARKETING AGREEMENT ACT OF 1937, AS AMENDED, 7 U.S.C. 608C (15) (A), MAY DEFENDANTS ATTAIN JUDICIAL REVIEW OF THE ALLEGED VIOLATION OF ORDER NO. 27. THE DEFENDANTS SUBSEQUENTLY FILED AN APPEAL IN THE MATTER WITH THE SECRETARY OF AGRICULTURE AND IT IS UNDERSTOOD THAT FINAL ACTION HAS NOT BEEN TAKEN ON SUCH APPEAL. IF AND WHEN AN ORDER IS ISSUED IN ACCORDANCE WITH THE OPINION OF JUNE 5, 1959, DEFENDANTS WOULD APPARENTLY BE REQUIRED TO DEPOSIT CERTAIN AMOUNTS INTO THE REGISTRY OF THE COURT PENDING THE OUTCOME OF ALL PROCEEDINGS.

IN COMPLIANCE WITH OUR INFORMAL REQUEST, WE RECEIVED A SUPPLEMENTAL REPORT ON THE PROTEST OF QUAKER MAID DAIRY PRODUCTS, INC., FROM THE DEPARTMENT OF THE ARMY, CONTAINING STATEMENTS OF THE CONTRACTING OFFICER AND THE JUDGE ADVOCATE AT FORT DIX, NEW JERSEY. BOTH STATEMENTS REFER TO THE FACT THAT FORT DIX, OR AT THE LEAST SUCH PART THEREOF WHICH IS INVOLVED IN THE RECEIPT OF MILK DELIVERIES, IS NOT WITHIN THE BOUNDARY OF ANY EXISTING FEDERAL MILK MARKETING AREA. THE CONTRACTING OFFICER STATES THAT HIS HEADQUARTERS HAS NO INFORMATION THAT THE CERTIFICATION OF THE JOINT VENTURE IS FALSE; AND THE JUDGE ADVOCATE HAS GIVEN CONSIDERATION TO VARIOUS STATEMENTS FURNISHED TO HIM IN CONVERSATIONS WITH THE PURCHASING AND CONTRACTING OFFICER, WHO REPRESENTED THE CONTRACTING OFFICER IN THE CONSIDERATION OF THE BIDS RECEIVED UNDER THE TWO INVITATIONS HERE INVOLVED.

IT APPEARS THAT MR. COMPAGNA, THE CONTRACTING OFFICER'S REPRESENTATIVE, WAS AWARE AT THE TIME OF THE OPENING OF BIDS ( JUNE 15, 1959) THAT THE FEDERAL MARKET ADMINISTRATION OFFICE FOR THE NEW YORK NEW JERSEY MILK MARKETING AREA HAD ALLEGED THAT THE STERLING DAVIS DAIRY WAS IN VIOLATION OF MARKET ORDER NO. 27, BUT THAT HE ALSO UNDERSTOOD THAT THE DAIRY DENIED AND HAS CONTINUED TO DENY THAT IT WAS IN VIOLATION OF SUCH ORDER AND THE QUESTION HAD NOT BEEN RESOLVED. MR. COMPAGNA IS STATED TO HAVE TAKEN THE POSITION THAT THE JOINT VENTURE'S CERTIFICATION WAS, IN THE ABSENCE OF PROOF TO THE CONTRARY, ACCURATE AND TRUTHFUL; THAT, EVEN IF THE STERLING DAVIS DAIRY WERE IN VIOLATION OF ORDER NO. 27, IT WAS NOT VIOLATING ANY FEDERAL MILK MARKETING ORDER IN CONNECTION WITH DELIVERIES REQUIRED TO BE MADE UNDER THE TWO CONTRACTS FOR DELIVERIES OF MILK TO FORT DIX; AND THAT, IN ANY EVENT, THE PROVISIONS OF PARAGRAPH 7 OF THE SPECIAL PROVISIONS DO NOT REQUIRE THE ARMY TO REJECT A BID OR TO TERMINATE UPON WRITTEN NOTICE TO THE CONTRACTOR.

WE REALIZE THAT THE DEPARTMENT WOULD HAVE A CERTAIN AMOUNT OF DISCRETION IN THE MATTER OF REJECTING A BID OR CANCELING A CONTRACT ON ACCOUNT OF KNOWN VIOLATIONS OF MILK MARKETING ORDERS. HOWEVER, BY INFERENCE AT LEAST, THE JUDGE ADVOCATE AND THE CONTRACTING OFFICER HAVE INDICATED THAT THE BID AND CONTRACT PROVISIONS WOULD NOT HAVE WARRANTED SUCH ACTIONS IN THE PRESENT CASE. THE JUDGE ADVOCATE'S STATEMENT UNDERLINES THAT PART OF PARAGRAPH 7 OF THE SPECIAL PROVISIONS WHICH USES THE QUALIFYING WORDS,"AND APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THE CONTRACT FOR WHICH THIS BID IS OFFERED AND/OR TO THE BIDDER.' ALSO, BOTH THE JUDGE ADVOCATE AND THE CONTRACTING OFFICER, BY EMPHASIZING THE BOUNDARY OF FORT DIX, APPEAR TO BE IN AGREEMENT THAT THE DELIVERY POINT IS THE IMPORTANT FACTOR IN DETERMINING WHETHER MARKETING ORDER NO. 27 IS APPLICABLE TO DELIVERIES AS SPECIFIED IN THE TWO INVITATIONS FOR BIDS. ON SUCH BASIS, IF THE CONTRACTING OFFICE KNEW AT THE TIME THE INVITATIONS WERE ISSUED THAT FORT DIX WAS NOT LOCATED IN ANY FEDERAL MILK MARKETING AREA, PARAGRAPH 7 OF THE SPECIAL PROVISIONS SHOULD HAVE BEEN DELETED.

IN VIEW OF THE FOREGOING, WE WOULD NOT BE WARRANTED IN CONCLUDING THAT THE AWARDS MADE TO THE JOINT VENTURE WERE ILLEGAL IN ANY RESPECT. ALSO, IN VIEW OF THE INDICATED INTERPRETATION OF PARAGRAPH 7 OF THE SPECIAL PROVISIONS BY RESPONSIBLE OFFICIALS OF THE DEPARTMENT OF THE ARMY, IT IS APPARENT THAT NO USEFUL PURPOSE WOULD BE SERVED IN FURTHER EXPLORING THE POSSIBILITY THAT THE CONTRACTS MIGHT BE CANCELED IF THE SECRETARY OF AGRICULTURE SHOULD DENY THE PENDING APPEAL AND FIND THAT THE STERLING DAVIS DAIRY IS SUBJECT TO THE RECORD-FURNISHING REQUIREMENTS OF FEDERAL MILK MARKETING ORDER NO. 27. IF THE ARMY THEN ATTEMPTED TO CANCEL THE CONTRACTS, IT WOULD UNDOUBTEDLY BE CONFRONTED WITH ANOTHER DISPUTE WHICH WOULD HAVE TO BE DETERMINED BY THE SECRETARY OF AGRICULTURE AND, IN ALL PROBABILITY, SUCH A DISPUTE WOULD NOT BE FINALLY SETTLED BEFORE THE EXPIRATION OF THE TWO CONTRACTS.

ACCORDINGLY, IT IS OUR VIEW THAT NO FURTHER ACTION BY OUR OFFICE IN THE MATTER IS REQUIRED.