tion there is only excepted from the fiscal year limitation the amount appropriated by the statute for the Tennessee Valley Authority. It must be concluded, therefore, that the allotment of funds for river and harbor work from the appropriation for carrying out the provisions of the National Industrial Recovery Act does not make such funds available for obligation beyond the fiscal year 1935, or for expenditure pursuant to such obligation after June 30, 1937.

(A-58496)

REAPPOINTMENTS IN THE TREASURY DEPARTMENT OF FORMER EMPLOYEES OF THE BUREAU OF PROHIBITION OR ALCOHOLIC BEVERAGE UNIT, DEPARTMENT OF JUSTICE

Personnel of the Secret Service Division, Bureau of Narcotics, and the Special Intelligence Unit, Bureau of Internal Revenue, Treasury Department, engaged primarily in detecting violations of law and in aiding in the apprehension, conviction, or punishment of violators, who were separated between June 10, 1933, and December 31, 1933, from positions having similar duties and responsibilities under the Prohibition Bureau or the Alcoholic Beverage Unit, Department of Justice, are within the terms of the proviso to the appropriation act of June 19, 1934, 48 Stat. 1061, prohibiting the use of the appropriations provided for the Treasury Department for payment of their salaries after December 1, 1934, unless and until they qualify as the result of an open competitive civil service examination.

Comptroller General McCarl to the Secretary of the Treasury, January 18, 1935:

There has been considered your letter of December 26, 1934, as follows:

On November 12th you advised this Department that the limitation on expenditure by the Treasury for salaries of former employees of the Prohibition Unit of the Department of Justice, contained in the Emergency Appropriation Act for 1935, is confined to positions involving duties of the classes enumerated in the proviso or duties similar thereto.

I transmit herewith memoranda giving the names, service records, and statements of duties of three groups of employees in the Secret Service Division, the Bureau of Narcotics, and the Special Intelligence Unit, respectively, who were employed as prohibition agents in the Department of Justice and were separated from that position during the period specified in the limiting proviso referred to above. While the present duties of these employees involve investigative work. the character of investigations which they make is so entirely different and distinct from the duties of any of the positions enumerated in the proviso in question that this Department is of the opinion that its funds may be legally used to pay their salaries. However, in view of the fact that your Office must finally determine the legality of such payments, the matter is submitted for your decision.

Since payments are being withheld in these cases, pending your decision, it will be appreciated if you will advise me what may be done as soon as you can conveniently do so.

The appropriation item, with the proviso in question, appears in the act of June 19, 1934, 48 Stat. 1061, as follows:

Collecting the internal revenue: For an additional amount for expenses of assessing and collecting the internal-revenue taxes, including the same objects specified under this head, and under the head "Salaries and expenses,

Bureau of Industrial Alcohol," in the Treasury Department Appropriation Act, 1935, and including so much as may be necessary for the compensation of one additional deputy commissioner, to be immediately available, $10,000.000; of which not to exceed $800,000 may be expended for personal services in the District of Columbia, and not to exceed $71,250 for the purchase of passengercarrying automobiles to be used on official business: Provided, That after December 1, 1934, no part of the appropriation made herein or heretofore made for the fiscal year 1935 shall be used to pay the salary of any person formerly employed as investigator, special agent, senior warehouseman, deputy prohibition administrator, agent, assistant attorney, assistant prohibition administrator, senior investigator, deputy production administrator, storekeeper or gauger, or any other position in the Prohibition Bureau or Alcoholic Beverage Unit, Department of Justice, who was separated from the service of such bureau or unit between June 10, 1933, and December 31, 1933, while in any such position in the Treasury Department, unless and until such person shall be appointed thereto as a result of an open, competitive examination to be hereafter held by the Civil Service Commission.

In decision of November 12, 1934, 14 Comp. Gen. 383, 384, it was stated, in part, as follows:

Clearly the inhibition of the proviso applies only to these appropriations for the Treasury Department which otherwise would be available for the payment of salaries for the fiscal year 1935 of persons employed "in any such position "—that is, in a position under the Treasury Department corresponding, as to duties, to one or more of the classes covered by the proviso, formerly in the Prohibition Bureau or the Alcoholic Beverage Unit of the Department of Justice.

However, there is no basis for holding that the proviso applies only to the specific appropriation to which it is attached, or only to appropriations for the Bureau of Internal Revenue. The terms of the statute are not so limited, but include broadly, in addition to the appropriation thereby made, any appropriation for any branch of the Treasury Department made prior to June 19, 1934, for the fiscal year 1935, but the inhibition applies only while the former employee is "in any such position in the Treasury Department ", that is to say, while serving in the Treasury Department in a position "corresponding, as to duties, to one or more of the classes covered by the proviso, formerly in the Prohibition Bureau or the Alcoholic Beverage Unit of the Department of Justice." (Quoting from the decision of Nov. 12, 1934, supra.)

In comparing the duties of the position occupied in any branch of the Treasury Department with the duties of one or more of the classes covered by the proviso formerly in the Prohibition Bureau or the Alcoholic Beverage Unit of the Department of Justice, titles are not necessarily controlling, but rather the general characteristics of the duties actually performed. The duties in connection with the investigation and detection of law violations are of the same general character, requiring substantially the same qualifications, irrespective of the particular law or laws violated. Apparently the officers and employees primarily sought to be reached by the proviso were those in the enforcement group, that is, those engaged primarily in detecting

violations of law, and in aiding in the apprehension. conviction, or punishment of the violators. No doubt it was due to their experience and qualifications as agents, special agents, investigators, etc., in the Department of Justice and prior thereto, that the employees whose cases are now presented were reappointed or reinstated in the Secret Service Division, the Bureau of Narcotics, and the Special Intelligence Unit, Bureau of Internal Revenue, Treasury Department. The fact that the law violations detected or investigated in positions under the Treasury Department relate to different laws than the alcoholic beverage laws which formed the basis of their work in the Department of Justice, alone, does not exempt such personnel from the inhibition of the proviso.

The facts presented in the papers forwarded with your letter fail to show a sufficient differentiation between the duties now performed by the employees in the three groups mentioned in your present submission and the duties of the positions in the Department of Justice from which they had been separated to exempt them from the inhibition of the proviso.

Your question is answered accordingly.

(A-58507) (A-59060) (A-59541)

BIDS-NECESSITY FOR BID BOND

While a bidder who fails to accompany his bid with a bid bond as required in the request for bids obtains thereby no absolute right to an award even though his bid might be low and otherwise proper, the public interest is for consideration in making the award. Whether the technical failure to submit a bid bond with the bid may be waived as in the public interest is controlled by the circumstances in the individual case surrounding the failure to submit the bid bond with the bid rather than a short time thereafter, the responsibility of the bidder, and the saving of public moneys to be made.

Comptroller General McCarl to the Secretary of War, January 21, 1935: There has been received your letter of December 26, 1934, as follows:

In accordance with your request of December 6, 1934, this Department transmitted to you by letter of December 19th the papers respecting the bids opened on November 21, 1934, for the construction of the Wills Creek Dam, a part of the project for the Muskingum River Valley Reservoirs, Ohio.

The lowest bid was submitted by the Edward J. Eiff Company for $628,007.50, but was not accompanied by a bid bond or guaranty. The lowest bid properly guaranteed in accordance with the invitation for bids was submitted by Wm. Eisenberg and Sons, Inc., for $674,852.60. The Edward J. Eiff Company furnished a bid bond two days after the opening of the bids.

Having in view your decision dated October 11, 1934, in the parallel case of the award for the construction of the Fort Peck Spillway, you were advised that unless your office found some reason to the contrary, this Department proposes to award the contract to the Edward J. Eiff Company. No other action appeared to be consistent with your prior decision.

In order that you may be fully advised in the matter, your attention is invited to the circumstances not set forth in the letter of transmittal. The

abstract of bids opened November 13, 1934, for the construction of the Tappen Dam, another item of the same project, shows that the Edward J. Eiff Company submitted a bid for that work which was not accompanied by a guaranty, being the only one of 28 bids not so guaranteed. As its bid for the Tappan Dam was not the low bid, no further action. was taken in the case, and no guaranty was subsequently furnished by the company.

It, therefore, appears that this company has deliberately pursued the procedure of submitting unguaranteed bids. Such a procedure, if permitted and encouraged, wil lead to chaos in the letting of public works, with consequent loss to the United States far exceeding any advantage that can be secured from the consideration of unguaranteed bids lower than the responsive offers submitted in accordance with the invitation for bids.

This Department considers that the public interest will be best served if the bid of the Edward J. Eiff Company for the construction of the Wills Creek Dam be discarded as irresponsive because unguaranteed and award made to Wm. Eisenberg and Sons Company for the execution of the work for the consideration named in the responsive bid of that company. Your consideration of the case, in the light of these developments, will be appreciated.

Also, there has been received your letter of December 28, 1934, in which the subject of bid bonds is further discussed, as follows: The statutes, orders, rules, and regulations under which bid bonds are required to accompany proposals for materials, equipment, and services to be purchased by this Department have been considered, and the purposes to be accompanied by and the underlying reasons for the requirements have been reviewed.

The act of April 10, 1878 (20 Stat. 36), as amended by the act of March 3, 1883 (22 Stat. 487) (section 218, title 5, U. S. Code), invests in the Secretary of War authority to prescribe rules and regulations to be observed in the preparation, submission, and opening of bids for contracts and to require that every bid be accompanied by a written guaranty as therein set forth. Pursuant to this authority the Secretary of War has prescribed the following rules and regulations:

"At the discretion of the chief of branch concerned, bid bonds may be required or waived (a) in special cases, or (b) by general instructions issued to purchasing officers, but will be required or waived alike to all bidders (Army Regulations 5-220, section 2, paragraph 6).

"(a) At the discretion of the chief of branch concerned, bid bonds may be required or waived (a) in special cases, or (b) by general instructions issued to purchasing officers, but will be required or waived alike to all bidders.

"(b) Bid bonds, signed by two responsible parties, or by a qualified surety company, will be required to accompany bids whenever, in the opinion of the officer authorized to make the contract, they are necessary to protect the public interest, and when so required, no bid unaccompanied by a bid bond, executed in manner and form as directed in the advertisement or specifications, will be considered" (772 O. & R., Corps of Enginers).

These regulations were duly issued pursuant to specific statutory authority as above set forth. It is well settled by numerous decisions of the courts that a regulation by a department of Government adapted to the enforcement of an act of Congress, the administration of which is confided to such departments, has the force and effect of law (Maryland Casualty Company v. U. S., 253 U. S. 342-349; 64 Ct. of Cls. 686; 5 Comp. Gen. 177).

The act of April 10, 1878 (20 Stat. 36) and the amendment thereto by the act of March 3, 1883 (22 Stat. 487) are the previous enactments which were codified into section 218, supra. The 1878 act was enacted pursuant to a bill introduced in the House of Representatives January 14, 1878, H. R. 2287. 45th Congress, second session. The history of the bill while under consideration in Congress may be found on pages 314, 1343, 1363, 2187, and 2257 of the Congressional Record of that session. See also Senate Report No. 218 on the bill.

The legislation was initiated at the request of the Secretary of War and on the advice of the Attorney General. See Annual Report of the Secretary of War, 1877, pages 15 and 16, and Opinions Attorney General, volume 9. page 174. The motive of the legislation was to prevent fraudulent and so-called "straw bids" and to prevent collusion between bidders wherein low bidders

would sell out to higher bidders, after the bids had been opened. See page 1343, Congressional Record, supra.

The above regulations were adopted by the Secretary of War after long experience from which it was amply demonstrated to be in the best interests of the United States that they be required. The facts and circumstances upon which this conclusion was based are hereinafter more fully set forth. In view of the difficulties encountered in the securing of bona fide and proper bids, it is considered highly undesirable in the best interests of the United States to d spense with the requirement in proper cases that a bid bond or adequate guaranty shall accompany the submission of bids.

The Government, since the act of March 3, 1925 (4 Stat. 114), has been committed by legislative enactment, together with the approval, request, and assent of the administrative branch of the Government, to the principle of holding bidders to the terms of their bids for a sufficient period of time for consideration of acceptance or rejection. During the past 110 years the requirements upon bidders have become more and more exacting in this respect in order to eliminate collusion among bidders, straw bids, and to require guaranty and collateral security from bidders and showings that bidders in fact are responsible parties qualified for the work and/or to supply the needs of the Government.

This Department considers that to dispense with the requirement that satisfactory guaranty shall accompany the bid in all cases would result in a prompt resumption of the intolerable conditions which the legislation and regulations were designed to correct and reform. It would be a very easy matter for a prospective bidder to determine after bids are opened, and the Government estimate and general level of bids are known, whether or not he would want a job at a certain figure. Responsible bidders of experience have no fear in submitting their estimates as bids, and surety companies have no reluctance in guaranteeing such bids. Only the bidder of little responsibility will find difficulty in securing the guaranty. Many such bidders would be willing to gamble on such jobs if it costs them nothing. When bids are opened, they at once. benefit from the experience and judgment of the experienced bidders. If such a nonguaranteed bidder finds his bid in line with that of trained bidders, he backs it up since he can then readily secure bond; if he finds his bid materially below the level established by the experienced bidders, he simply fails to enter into contract. The Government must sue to recover the difference between the defaulters' and the accepted bid, and, if successful in the suit, very probably would find no assets to realize upon.

While it is true that in executing the standard form of bid, the bidder covenants that the United States has sixty days, or other fixed period, after the date bids are opened within which to accept bids, and this agreement would furnish the Government a cause of action if violated by the bidder, the Government has no guaranty therefrom against withdrawal of bid before award and would in every case have to resort to a law suit to protect its interests. Such a suit could often be defeated by a trivial or unimportant defect in the specifications which would be seized upon by an irresponsible bidder as a defense.

Not only will irresponsible bidders submit individual bids as a gamble, but, without the bid bond requirement, they may submit multiple straw bids, backing up with performance bond their highest bid which is low enough to take the award. Such a course was instantly suggested as a probability by a responsible contractor on learning of your recent ruling, with the added information that bidders have actually contemplated such procedure in the past in cases where the bid guarantee was low in amount.

Another evil which the bid bond largely eliminates is the bid of the "broker", who has no intention of doing the work himself but is willing to submit a bid with the idea, if successful, of selling the job to another contractor for actual performance. Surety companies will not give bid bonds to such bidders and the cost of the bid bond or other bid security is also a deterrent.

I am inclosing a copy of a letter from the Associated General Contractors of America and a copy of a resolution of the executive committee of the Dredge Owners' Protective Organization, which disclose the feeling of those organizations on the bid bond requirement.

Summarizing, the abolition of requirement that bid security accompany bids will result in the following practices inimical to the interests of the United States: