« PreviousContinue »
from the pending bill.95 The reason for this rule is organizational and jurisdictional—to assure that the cognizant legislative committees have first had the opportunity to review and approve or reject the program. However, if no point of order is raised, the appropriation act itself becomes the authority to enter into contracts as well as make payments thereunder,
the Coast Guard, and the National Science Foundation.' In practice, this has led to annual authorization acts such as Pub. L. 92-84 for AEC, Pub. L. 92–86 for NSF, Pub. L. 92–118 for the Coast Guard, Pub. L. 92–145 for military construction, Pub. L. 91–441 for military procurement, and Pub. L. 92–69 for NASA.
Occasionally, authorization acts may provide multi-year authorizations. Pub. L. 91-515 authorizes appropriations for education and health research for fiscal years 1971, 1972, and 1973.
Annual authorization acts often include general provisions which have significant impact on procurement. The Armed Forces Appropriation Authorization Act of 1970 2 has provisions restricting independent research and development (IR&D) payments and salaries at Federal contract research centers; directs a GAO defense contracts profit study; and requires registration of former DOD officers and employees employed by defense contractors.3
the Presirler majorsted with comma
Program authorizations may be permanent or recurring, and the latter in turn may be annual or multi-year authorizations depending on whether they cover one or more years. Annual authorizations and, less frequently, multi-year authorizations are provided by annual authorization acts. Permanent authorizations are found in an agency's organic legislation or other specific legislation of a continuing nature. Permanent authorizations generally are for personnel, maintenance, operations, housekeeping, repair, and minor improvement programs, as contrasted with capital improvement or other major programs. For example, the President's budget cites permanent United States Code provisions in support of appropriations for "operations and maintenance" for the Army, Navy, Marine Corps, and Air Force and for "operating expenses" of the Atomic Energy Commission. There is also permanent authorization to appropriate for experts and consultants ; 96 for advance planning of public works ;97 and for fish research.98 On the other hand, annual military construction appropriation acts are generally preceded by annual military construction authorization acts.
There has been a growing trend in recent years for Congress to require separate authorization acts as a prerequisite to appropriations. Thus, specific authorization acts now are prescribed for the procurement of military aircraft, missiles, vessels, research and development, combat vehicles, torpedoes, and other weapons.". Similar requirements have been extended to certain programs of NASA, AEC,
Many programs are authorized but not all are funded, and until they are funded, they remain in limbo. Some are deferred, some reduced, some abandoned. In addition to the intrinsic merits of each program, Congress has to consider the relation of total expenditures to total receipts, with an eye to achieving an overall balance between national needs and resources. It therefore has to make a choice of priorities among competing programs.
Programs can be funded by annual appropriations, multi-year appropriations, continuing appropriations, interim appropriations, or incremental appropriations. Most normal repetitive programs-operations, maintenance, repair, minor improvements—are funded by annual appropriations. This means that a contract must be limited to the bona fide needs of the current fiscal year, though deliveries and payments may be made later. It also means that a contract must be entered into before the June 30 close of the fiscal year. It is this latter requirement which gives rise to the socalled “contract crunch" at the end of each fiscal year when contracting agencies scurry to spend their remaining funds. Any annual appropriation not committed by that time is forever lost to the contracting agency.
es See Rule XXI, 2., Rules of the House of Representativen, 92d Cong., 1st Sess.
* 5 U.S.C. | 8109 (1970).
142 U.S.C. $$ 2460, 2017(a), 1875; 14 U.S.C. | 92 note (1970).
Programs involving capital expenditures, such as for military construction, aircraft, missiles, ships, and research and development, generally are funded by continuing appropriations, that is, appropriations expressly made "available until expended.” This may be done by a permanent United States Code provision,” or it may be and usually is done in the appropriation act itself.
In some cases appropriations take the intermediate form of a multi-year appropriation, that is, expressly made available, not annually or indefinitely, but for a specified number of years. The DOD Appropriation Act of 1972 makes the research and development appropriation "available for obligation until June 30, 1973.” In fact, there is a growing trend to restrict the use of continuing or indefinite appropriations. Thus, some current appropriation acts include provisions against the funds remaining "available for obligation beyond the current fiscal year unless expressly so provided herein.” 10 The DOD Appropriation Act makes its title IV procurement appropriations "available for obligation until June 30, 1974" generally, but until June 1, 1976, for shipbuilding. The specific legal effect of such provisions is to overcome the permanent United States Code provisions, noted above, making certain appropriations available until expended.
In recent years, Congress has failed to enact most annual appropriations before July 1, the start of each new fiscal year. For example, the DOD Appropriation Act for Fiscal Year 1972 was not approved until December 18, 1971. Interim or continuing appropriations, effected
by joint resolution, are necessary to tide an agency over the period of delay. A recent example is Pub. L. 92–38, approved July 1, 1971. In effect, these authorize appropriations to continue agency program operations at substantially the same level of activity as under the expired appropriation act, except for modifications reflecting proposed budget requests or action by either house of Congress during the current session.
Appropriations occasionally may be in the form of incremental appropriations under which a project is only partially funded, but express contract authorization is given to contract for the entire project. This is partieularly relevant to water development 11 or other major projects which take years to aecomplish.12 Annual appropriations sometimes may be used as incremental appropriations in support of programs under which long-term contracts are authorized. The “contracts for utility services may be made for periods not exceeding ten years;" 13 contracts for overseas maintenance services for the military may be for five years; 14 and GSA contracts for services on equipment in public buildings may be for three years.15 DOD research contracts may be for five to ten years though the authority thereunder is a mixed and uncertain blessing because it is granted “subject to availability of appropriations." 16
One further aspect of appropriation acts should be noted. They contain numerous general provisions, many repeated from year to year, which affect procurement either by enhancing, restricting, or shaping contract authority. For example, the DOD Appropriation Act of 1972 contains some 18 general provisions regarding such things as contracting across fiscal years for equipment maintenance and leases, assistance to small business, the "Berry Amendment” requirement for food, cloth, wool, etc., advertising costs of contractors, etc.
31 U.S.C. $$ 712a, 718 (1970). * For example, 31 U.S.C. § 649c for military equipment, research and development, and construction and 31 U.S.C. $ 682 for public building construction. See also 31 U.S.C. § 699 (1970).
* For example, under Pub. L. 92–134, the AEC appropriation for plant and capital equipment is specifically "to remain available until expended."
Pub. L. 92–204. 10 See DOD Appropriation Act of 1972, Pub. L. 92-204, § 711 ; Pub. L. 92–134, $ 501.
11 For example, 43 U.S.C. $ 388 (1970).
12 For example, 40 U.S.C. 261 (1990) provides that where public buildings are authorized but only partially appropriated for, a contract may nevertheless be entered into for the full cost of the building as authorized by Congress.
13 40 U.S.C. 481 (a) (3); see 42 U.S.C. | 2204, 50 U.S.C. § 167a and 42 U.S.C. $8 2201 (u), 2204a (1970).
14 10 U.S.C. $ 2306 (8) (1970).
or other documentary evidence of obligations; 83 provisions for apportionment of appropriations ; 34 provisions for disciplining employees violating fund controls; 35 provisions limiting advance payments; 36 and provisions requiring various reports to Congress.37
Statutory provisions may control the source of procurement. They may be general in nature, such as those requiring award to a “responsible bidder" 17 or a regular dealer; 18 preference or a fair share for small business; 19 or preference for Buy American,20 Federal Prison Industries, 21 or workshops for the blind and handicapped.22 They may authorize placing orders with other agencies.23 One is directed toward vessel construction at shipyards on the Pacific Coast.24 A number of them directly pertain to the in-house versus contracting-out problem; for example, provisions directing use of commercial air transport; 25 restricting bakery and laundry facilities; 26 authorizing Government or contractor operation of Governmentowned plants; 27 preferring private sources if cheaper; 28 prohibiting operation of Government-owned laboratories by the National Science Foundation ; 29 requiring Government printing to be done by the Government Printing Office; 30 requiring 50 percent use of privately owned United States registered vessels for shipment of Government property or purchases.31
Award procedures are covered primarily by the Armed Services Procurement Act, particularly 10 U.S.C. $$ 2304-6, for DOD, NASA, and the Coast Guard; by title III of the Federal Property and Administrative Services Act, 41 U.S.C. $$ 252–253, for the other executive agencies; and by R.S. § 3709, 41 U.S.C. § 5, for the remaining Government agencies. These laws prescribe award by formal advertising with 17 negotiation exceptions under the Armed Services Procurement Act, 15 under the Federal Property and Administrative Services Act, and four under R.S. § 3709. Procedures for formal advertising are set forth in 10 U.S.C. § 2305 and 41 U.S.C. § 253, and requirements for negotiation solicitations and discussions in 10 U.S.C. § 2304(g).
Accountability and Controls
Statutes in this area include the Budget and Accounting Act of 1921 establishing the General Accounting Office with authority to audit accounts of disbursing officers and settle claims against the Government; 32 provisions requiring binding contracts or agreements, orders placed on other Government agencies,
The statutes include provisions relating to the form of contracts. Contracting agencies generally may use any form of contract.38 However, the cost-plus-a-percentage-of-cost contract is prohibited. 39 Cost-plus-fixed-fee and incentive contracts are authorized but discouraged by requirements for a determination and findings,40 or, in the case of military construction, approval by the Secretary of Defense.41 Agencies are authorized to use grants
17 10 U.S.C. & 2305 (b) (1970); cf. 82304 (8).
28 31 U.S.C. 8 686 (1970).
33 31 U.S.C. $ 200 (1970).
3 10 U.S.C. $ 2306 (a) ; 31 U.S.C. § 254 (b): 10 U.S.C. $ 7522; 42 U.S.C. $8 1533, 1592h, and 2205(a); 50 U.S.C. $ 1432 (1970).
40 10 U.S.C. $ 2306(c); 41 U.S.C. $ 254 (b) (1970).
Government contracts. DOD appropriations may not be used to pay certain advertising costs of contractors.53 Restrictions are imposed on reimbursement of independent research and development and bid and proposal costs under military contracts.54 The AEC may not reimburse contractors for Federal income tax payments.55 Finally, to assure uniformity in the identification and allocation of cost factors under Government contracts, Pub. L. 91– 379, § 103, established the Cost Accounting Standards Board and authorized it to promulgate cost accounting standards which must be used by defense contractors and subcontractors.
In 1897 Congress, provoked by the high prices the Navy was paying for armor plate, decreed that it should be $300 a ton.45 The companies simply refused to do business on this basis and Congress soon gave up.46 Congress was merely repeating history. Some 1600 years before, the Edict of Diocletian had fixed the price of military boots at 100 denarii, but “the reaction to these 4th century regulations according to the historian Lactantius was the same as today—merchants withheld goods from the market.” 47
Nevertheless, there are a few statutes which impose price controls in limited areas of Government procurement. Thus, rates for transportation of military supplies and for advertising cannot exceed commercial rates. 48 Rental rates for buildings cannot exceed 15 percent of their fair value.49 Under some statutes prices have to be based on Government production costs of like items.50
Statutes also limit fees on CPFF research contracts to 15 percent of the estimated cost; on other CPFF contracts to ten percent; and on architect-engineer contracts to six percent of the estimated cost of the construction project.51 Probably the most significant step in the direction of fair pricing is the Truth in Negotiations Act, under which cost or pricing data must be submitted before entering into negotiated contracts and subcontracts.52
Statutes also limit certain costs payable under
"Profiteering and waste has accompanied every American war from the Revolution to date.” 56 General Washington violently condemned war profiteering and wanted to hang the “man who can build his greatness upon his country's ruin.'” 57 From time to time Congress reacted, investigated, found fault, and took action; for example, to require competition, impose price ceilings, and minimize bribery, corruption, collusion, and conflicts of interest.
But not until World War I did Congress do anything specifically directed at profits as such. Its first effort was in the form of an excess-profit tax.58 However, this did not prove effective.59
Accordingly, with the revival of shipbuilding in the 1930's, Congress took a new tack in the form of a 10-percent profit limitation on naval aircraft and shipbuilding contracts.co Later, this was extended to Army aircraft and Maritime Commission shipbuilding. 61 This operated much like a cost-plus-percentage-of-cost contract in eliminating any incentive to reduce costs. With World War II imminent, the excess profits tax was reinstated and contracts subject to the tax were exempted from VinsonTrammell. 62
42 U.S.C. & 1891 (1970). 43 10 U.S.C. $ 2388 (1970). * 22 U.S.C. $ 2351 (b) (8) (1970). 45 29 Stat, 648 (1898). *31 Stat. 684, 707 (1900). 47 Caine, War Contracts Negotiation and Termination, p. 7 (1945). 48 10 U.S.C. & 2631 ; 44 U.S.C. & 3703 (1970). 49 40 U.S.C. 88 278a-c (1970). 59 33 U.S.C. 88 624, 630 ; 42 U.S.C. $ 2295 (1970).
$1 10 U.S.C. § 2306(d); 41 U.S.C. $ 254 (b). See also 10 U.S.C. $$ 4540, 7212, and 9540 (1970).
62 10 U.S.C. $ 2306(f) (1970).
53 For example, Pub. L. 91-668, § 834.
59 Nye Committee Report, S. Rep. No. 944, 74th Cong., 2d Sess., Parts 4, 5, and 7 (1935, 1936).
60 Vinson-Trammell Act of 1934, 10 U.S.C. $8 2382, 7300 (1970). 61 Merchant Marine Act of 1936, 46 U.S.C. $ 1155 (1970).
During the early 1940's, Congress considered various alternatives, including one that the services had begun to use in the form of contract renegotiation. This led to the Renegotiation Act of 1942,63 the Renegotiation Act of 1943,64 the Renegotiation Act of 1948,85 and finally, after a brief revival of the excess profits tax,66 the current Renegotiation Act of 1951.67 Although originally short-term, the Act of 1951 has been repeatedly extended, the last time to June 30, 1973, by Pub. L. 92–41. Under the current act the Renegotiation Board makes a determination of excess profits in the light of a contractor's individual performance and circumstances and on the basis of his total renegotiable business for each year. Pub. L. 92–41 substituted the Court of Claims for the tax court as the forum for appeal from determinations of excess profits by the Renegotiation Board.
U.S.C. § 254(b), 41 U.S.C. S 10b, 41 U.S.C.
§ 51 Catastrophic accidents—Price-Anderson Act,
42 U.S.C. § 2210, 10 U.S.C. § 2354, 50
U.S.C. § 1431 Relief from liquidated damages, 10 U.S.C.
§ 2312, 41 U.S.C. § 256a Patent policy, authorization and consent, 28
U.S.C. § 1498(a), 10 U.S.C. § 2386, 42
§ 2473(b) (3) Government property and facilities, 10
U.S.C. § 2353, 10 U.S.C. § 4505, 10 U.S.C. § 9505, 40 U.S.C. § 484, 42 U.S.C. § 241 (h), 42 U.S.C. $$ 1857b_1(a) (2), 42 U.S.C. & 2061(b), 42 U.S.C. § 2201(v) (A),
42 U.S.C. S 3253(b) (3) Amendments without consideration, 50
U.S.C. § 1431
Remedies: Suits, Disputes Clauses, Bid Protests
Numerous statutes govern such miscellaneous matters pertaining to contract administration as the following: Contract bid and performance bonds—
Miller Act, 40 U.S.C. $ 270a, 10 U.S.C.
§ 2381 Contract financing, 10 U.S.C. $ 2307, 41
U.S.C. § 255, 10 U.S.C. $ 7364, 10 U.S.C. $ 7521, 31 U.S.C. $ 203, 31 U.S.C. $ 529, 41 U.S.C. § 15, 42 U.S.C. $$ 1961c-2, 42
U.S.C. § 3764 Access to records, 10 U.S.C. § 2306(f), 10
U.S.C. § 2313(a) (b), 41 U.S.C. § 254(b)(c), 41 U.S.C. § 53, 42 U.S.C. $ 2206, 50 U.S.C. § 1433, 50 App. U.S.C. $ 1215(e),
50 App. U.S.C. § 2168(j) Subcontracts, 10 U.S.C. § 2306(e), (f), 41
One of the traditions carried over from England was the immunity of the sovereign from suit.88 Accordingly, in the early days, contractors had no access to the courts and their only recourse to enforce their contract rights was by private bill in Congress. To relieve itself of this burden and to assure due process to contractors, Congress established the Court of Claims in 1855,69 and later, under what eventually became the Tucker Act of 1887,70 authorized suit by contractors.rı It has also authorized suit in the District Court for claims for up to $10,000.72
About the same time, contract disputes clauses evolved and these proved generally acceptable until the Supreme Court gave them a literal interpretation in United States v. Moorman,73 and United States v. Wunderlich.74 Congress then passed the Wunderlich Act 75 which
62 54 Stat. 974 (1940).
68 United States v. Shaw, 309 U.S. 495 (1940); Kawananakoa v. Polyblank, 205 U.S. 349 (1907).
69 10 Stat. 612 (1855).