§ 117. Renegotiation of Contracts; Excess Profits.

VI. CANCELLATION AND TERMINATION.

§ 121. Settlement, Generally.

§ 123. - Subcontractor's Claims.

VII. MISCELLANEOUS.

A. IN GENERAL.

§ 135. Transfer or Assignment of Contracts.

§ 139. Contractor's and Bidder's Bonds.

§ 145. Foreign Purchases.

B. EMPLOYEES OF CONTRACTORS; HOURS OF LABOR.

§ 149. In General.

§ 165. Liabilities of Contractors.

I. IN GENERAL

§ 1. Generally

§ 1.11. Inter-department or agency contracts or services, generally. A government agency may contract for items or services to be furnished by another government agency at rates established by the servicing agency as long as the rates are reported to be based upon the cost of rendition of the service and do not appear to be excessive. Both the requisitioning agency and the servicing agency are bound by the general requirement that the services be furnished at cost but the requisitioning agency has no obligation to audit the costs of the servicing agency to determine the correctness of the charges made by it. (See Sec 601 of the Economy Act of 30 June 1932, 47 Stat 417, as amended, 31 USC 686, ML 1949, sec 1926; sec 113a of the Economic Cooperation Act of 1948, 62 Stat 148, 22 USC 1511(a),

ML 1949, sec 1926a; sec 403 of the Mutual Defense Assistance Act of 1949, 63 Stat 717, 22 USC 1574.) MS Comp Gen B-114664, 32 Comp Gen 479, 29 April 1953.

§ 1.17. Originals and duplicates of contracts.

The duplicate signed copy of a contract, which is retained in the office of a Contracting Officer, the officially designated office of record (Procurement Instructions 1-609.1), is an "original" contract. Accordingly, the Contracting Officer may certify, pursuant to AR 27-5, 3 Apr 1951, that copies of such duplicate signed copies are true and complete copies of the original contracts. (See 32 CJS 749; 4 Wigmore on Evidence (3d ed, 1940), sec 1233; 20 Am Jur, Evidence, § 427, p 380.) JAGA 1953/1024. 5 January 1953.

§ 17. Payment

$17.7. Payments in advance.

A voucher dated 6 October 1953, proposed payment to a company in a specified sum for its "contracted" promise to maintain a thoroughfare between two camps in Austria for a period of four years commencing from 18 August 1953. The propriety of making payment on the voucher was questioned on the ground that it would constitute a payment in advance of the value of any of the services sought to be engaged under the repair or maintenance agreement referred to and thus be in contravention of the provisions of sec 3648, Revised Statutes, 31 USC 529. Section 602, Title VI, Public Law 179, 83rd Congress, provides that sec 3648 of the Revised Statutes does not apply to payments made in compliance with the laws of foreign countries or their ministerial regulations, to payments for rent in such countries for such periods as may be necessary to accord with local custom, or to payments made for tuition. Held: Payment on the voucher is not authorized. There is no legal justification for disregarding the provisions of the statute prohibiting the advance of public money since the instant case cannot be regarded as falling within any of the excepted situations. (Citing 19 Comp Gen 758, 760 and authority there cited.) Comp Gen B-117798, 33 Comp Gen

272.

16 December 1953.

II. REQUISITES AND VALIDITY

§ 23.5. Personal services.

A

§ 23. In General

contract by the Government wherein the contractor was to furnish and perform all work necessary to prepare shipping orders, notices of delayed items, and other forms connected with shipping orders at the Engineer Supply Control Office, St. Louis, Missouri, all as directed by the contracting officer, for the unit prices stipulated in the contract, with the contractor to furnish approximately 5734 "Distribution Documents" and 2037 "Purchase Documents" monthly during the period covered by the contract, for which payment was to be made at the rate of $1.71 and $1.42, respectively, per unit, and on the other hand the government was to furnish

"all heat, office space, utilities, operating supplies and miscellaneous equipment required" in the performance of the contract, was in contravention of the long-standing rule that persons performing purely personal service for the government be placed on government payrolls and made subject to its supervision (32 Comp Gen 18), and such contract should be terminated at the earliest practical date, having in mind the essential nature of the services and the necessity for their performance without interruption. In the contract in question it appears that the government furnishes everything necessary for the performance of services except the employees and there was no contention that the latter could not have been hired by the government in the usual manner. The services are of a character usually performed by classified employees and they are of a continuing or, at least, of indeterminate duration. MS Comp Gen B-113739, 32 Comp Gen 427. 3 April 1953.

§ 23.7. Mutuality of obligation.

In an action by the government for breach of a bid contract to buy surplus property, it appeared that the defendant's bid for certain surplus property was accepted by the government but the defendant refused to pay the amount he bid and to comply with the terms of his bid contract. One of the conditions of the government's offer to sell the property was that the government reserved the right to withdraw from sale any property prior to the removal thereof without incurring any liability except to refund to the purchaser any amount paid with respect to the property. The defendant had knowledge of this condition when he made his bid. Held: The defendant's contention that he was not bound by the contract because it lacked mutuality of obligation due to the condition permitting the government to withdraw the property was without merit. In disposing of surplus property the government is not engaged in normal trade. In disposing of property it may attach such reasonable conditions as are necessary for the general welfare. If one does not wish to bid for government surplus property with the conditions attached, his alternative is to make no bid. (Citing Erie Coal & Coke Co. v. U. S., 266 US 518, 69 L ed 417, 45 S Ct 181; cf. U. S. v. Barowsky, 91 F Supp 149; Schneiderman v. U. S., 93 F Supp 626, 117 Ct Cl 715; North & Judd Mfg. Co. v. U. S, 84 F Supp 649, 114 Ct Cl 355; Surplus Property Act of 1944, 58 Stat 765, secs 2, 5, 6.) United States v. Weisbrod, 202 F2d 629.

§ 23.31. Contract in violation of statute imposing penalty.

On 24 April 1950, the Secretary of Labor found that two persons, copartners, doing business under a certain firm name had violated representations and stipulations required by the Walsh-Healey Act, 41 USC 35, in the performance of their contracts. In accordance with section 3 of the act, the sanction that no contracts shall be awarded to such persons or firms or to any firm, corporation, partnership, or association in which such persons or firms have a controlling interest until three years have elapsed became effective on such date. On 14 November 1951, during the statutory period of debarment, one of the partners submitted a bid under another firm name

which, by acceptance by the government, became a contract. The contracting officer reported that because the name of the second firm did not appear on the list of debarred contractors and the names of the individual partners were not checked, the contract was awarded in ignorance of the ineligibility. When it was ascertained that the second firm was composed of the same persons who were in the first firm, the firm was advised that the contract was cancelled as void ab initio. Some completed items were delivered to the government but payment was refused.

Held that:

the date of commencement of the three year period of ineligibility was 24 April 1950, the date of the final action of the Secretary of Labor and not, as contended, June 1948, the date the trial examiner made the original findings of violations, since the partners took exception to the examiner's report and later petitioned for review of the findings and conclusions of the Administrator, Wage and Hour and Public Contracts Divisions, all in reliance upon the Secretary of Labor's regulations and final authority in the matter.

a contention that the statute does not make contracts void but at most voidable cannot be accepted. The statutory direction that no contracts shall be awarded is in the nature of a punishment or penalty imposed on those who have breached conditions made part of their contracts by the statute. In no sense can it be regarded as leaving any option to award contracts in the contracting agency. It is an unequivocal mandate which removes any authority to make contracts. Where positive legislative intent to Outlaw agreements is apparent such agreements are illegal and void even though the statute does not expressly so provide. (See 17 CJS, Contracts, sec 201, and cases cited therein.)

a contention that the government is liable on the theory of quantum meruit for the goods retained by it cannot be sustained. Not only is an unauthorized contract unenforceable according to its terms, but no contract can be implied where a statute positively prohibits the transaction. The United States is neither bound nor estopped by acts of officers or agents in entering into agreements prohibited by law even though the government may have benefited thereby. Limitations on authority to impose contract obligations

on

the United States are as applicable to implied contracts as to express contracts. (See Sutton v. U. S., 256 US 575, 65 L ed 1099, 41 S Ct 563; Pan American Company v. U. S., 273 US 456, 71 Led 734, 47 S Ct 416; Providence Engineering Corp v. Downey Shipbuilding Corp, 294 F 641, cert den 264 US 586, 68 L ed 862, 44 S Ct 334.) While some cases support a view that where the government has received the benefit of labor and accepted supplies, it is liable under an implied contract, such cases are restricted to instances of irregular rather than illegal contracts. MS Comp Gen B-115051, 33 Comp Gen 63. 6 August 1953.

§ 23.41. Letter contracts or letters of intent; commitments.

Under so-called letter contracts or letters of intent, four contractors were authorized to undertake repairs or alterations to gov

ernment buildings and to enter into subcontracts and to incur expenses up to a stated maximum amount pending negotiation of a definitive contract on a lump-sum basis. However, execution of the definitive contracts was not effected, and the bonds required by the Miller Act (49 Stat 793) were not furnished until the work was entirely or practically completed in two cases and approximately 50 per cent completed in the other two. The cost limits stipulated in the letters were consistently disregarded and increased by successive amendments after they had already been exceeded. Held: In connection with the contracts in question, where the cost limits were consistently disregarded and increased by successive amendments after they had already been exceeded, and where definitive contracts were delayed until the work was in the last stages, the execution of the so-called lump sum contracts was more in the nature of settlement of the contractors' claims than the negotiations of contracts. In the future such final contracts will not be considered as binding obligations of the Government, and credit for payments under any such contracts, equal to the percentage fees provided for in the preliminary agreements, will be disallowed in the audit. The use of letter contracts or letters of intent should be resorted to only under conditions of the utmost urgency (cf. Army Procurement Procedures, 1-909.1c). Furthermore, there should be strict compliance with the requirement of Administrative Order No. 123, April 11, 1952, that the definitive contracts should be executed prior to the completion of one-third of the work.

Held also: The Miller Act requires procurement of performance and payment bonds before any contract contemplated by the Act is awarded, hence, the execution of performance and payment bonds after completion of the work does not comply with such Act. MS Comp Gen B-110609, 33 Comp Gen 291. 14 January 1954.

§ 27. Advertising and Bids

§ 27.31. Negotiation of contracts without advertising in national emergency.

See MS Comp Gen B-119588, infra § 29.11.

§ 27.49. Anticipated depreciation as factor.

In evaluating bids for passenger automobiles on a formally advertised procurement, it was proposed to consider anticipated depreciation over a five-year period in determining the successful bid, using the National Automobile Dealers' Association Official Used Car Guide's as-is values for 1948 as a basis for determining such probable depreciation five years hence. Held: To introduce the element of prospective depreciation into the procurement of automobiles would lead to confusion and uncertainties in the administration of the advertising for bids statutes and is not contemplated or authorized under law. What would be true in the case of automobiles would also be true in the case of many other types of equipment and it is likely that the available guides to anticipated depreciation as among different makes of other equipment would be even more speculative