barred finality of administrative determinations of law and provided exceptions to the finality of administrative determinations of fact. Another statute provided authority to subpoena witnesses where necessary for the hearing of an appeal under the disputes clause.76 77 Under the provisions of 31 U.S.C. §§ 67 and 71, the Comptroller General has authority to settle the accounts of disbursing officers, and by virtue of this authority he has exercised jurisdiction over bid protests. This was generally the only avenue of relief available. Under the rationale of Perkins v. Lukens Steel Co., it was the general rule for a long time that companies without a contract had no standing to sue, though some exceptions were recognized, for example, debarment.78 However, the Administrative Procedure Act provides for judicial review of adverse agency actions."9 Under this statute and for other reasons, it was held in 1970 that bidders have standing to sue. So Socioeconomic Objectives As noted in the beginning of this part, probably the most significant development in the statutory law of Government contracts has been the use of contracts to achieve socioeconomic goals collateral and, in a sense, irrelevant to the hardware or other end items being procured. In this respect, Government contracts carry a burden which puts them in a class by themselves. They have no counterpart in commercial business. One of the reasons for this use of Government contracts was that during the Great Depression they provided a more certain legal vehicle for regulation by the Government of areas of the general welfare that once were thought to be the exclusive domain of the States. At first, the Government had tried to provide some form of economic relief in re 75 41 U.S.C. §§ 321, 322 (1970). 76 5 U.S.C. § 304 (1970). 77310 U.S. 113 (1940). 78 Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964). 79 5 U.S.C. §§ 702, 704 (1970). 80 Scanwell Laboratories, Inc. v. Thomas, 424 F.2d 859 (D.C. Cir. 1970). liance on its taxation and interstate commerce powers, but the Supreme Court ruled these efforts unconstitutional.81 Today, following the Roosevelt constitutional revolution of the 1930's, a more expansive view of Federal authority prevails, and the Government can pursue these goals directly.82 There still remains the prevailing belief, based on practical considerations, that a Government contract is a powerful motivator, partaking more of the carrot than the stick, and therefore better calculated to win acceptance of social change. At any rate, beginning in 1844,83 Government contracts have been used to serve many interests and beneficiaries other than the contractor, to wit, big business, small business, materialmen, laborers, consumers, every race, color, creed, origin, sex, the old, the young, apprentices, prisoners, the blind, animals, safety, health, distressed areas, hardcore areas, disadvantaged enterprises, gold flow, the environment, the technological base, the production base, and geographical distribution. For example: Buy American, 41 U.S.C. § 10a-d, 46 U.S.C. Small business, 15 U.S.C. § 631, 10 U.S.C. § 2301, 23 U.S.C. § 304, 41 U.S.C. § 252(b) Distressed areas, 42 U.S.C. § 2642, 73 Stat. 382 Sec. 8a contracts for disadvantaged enterprises, 15 U.S.C. § 637 (a) Blind-made products, 41 U.S.C. § 48 81 United States v. Butler, 297 U.S. 1 (1936); A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935); Carter v. Carter Coal Co., 298 U.S. 238 (1936). Cf. Perkins v. Lukens Steel Co., 310 U.S. 113 (1940), where the court said that "the Government enjoys unrestricted power . . . to fix the terms and conditions upon which it will make needed purchases." See Steward Machine Co. v. Davis, 301 U.S. 548 (1937), Labor Board v. Jones & Laughlin, 301 U.S. 1 (1937), and United States ▼. Darby, 312 U.S. 100 (1941), upholding the Social Security Act, National Labor Relations Act, and Fair Labor Standards Act. 83 See Van Cleve, The Use of Federal Procurement to Achieve National Goals, Wisc. L. Rev. (1961) 566, 578. 40 U.S.C. § 327; Service Contract Act, 41 U.S.C. § 351; Copeland Anti-Kickback Act, 18 U.S.C. § 874, 40 U.S.C. § 276c; Fair Labor Standards Act, 29 U.S.C. § 206(e) Equal employment opportunity, Executive Order No. 11246 (1965) Price and wage controls, Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note Environmental protection, 42 U.S.C. § 1857f; Pub. L. 92-500; Pub. L. 92-574. Safety standards, 40 U.S.C. § 327, 40 U.S.C. § 701; Occupational Safety and Health Act of 1970, 5 U.S.C. § 5108 Humane slaughter of livestock, 7 U.S.C. 1901 Gold flow, 7 U.S.C. §§ 1704, 1705; 22 U.S.C. §§ 295, 2362 Geographic dispersion, 49 U.S.C. § 1638; Pub. L. 90-119, § 4; 50 U.S.C. App. § 2062. In the absence of statutes such as the above and in the face of competitive bid and other statutory requirements, the Comptroller General held in the 1930's that contracting agencies were not authorized to encumber Government contracts with socioeconomic objectives restricting competition and increasing contract costs, no matter how worthy the purpose and desperate the need. Currently a more tolerant view of executive authority by the Comptroller General is indicated by his acquiescence in programs, such as for Equal Employment Opportunity, Labor Surplus Areas, and Minority Enterprise, which originated in executive action without express statutory authorization.85 Conflicts of Interest In 1809, Congress enacted an "Officials-NotTo-Benefit" law which completely barred members of Congress from sharing in Government contracts. Since then, it has adopted other measures criminal penalties, debarment, contract forfeiture, contract penalties, double 84 See 18 Comp. Gen. 285 (1938), which invalidated contract clauses prescribing wages, hours, fair labor practices, Hire American, commodity price supports, etc. 85 Executive Order No. 8802 (1941); Defense Manpower Policy No. 4; Presidential Memorandum, Dec. 5, 1969. 86 18 U.S.C. § 431 (1970). damages, restrictions-directed at Government contractors, employees, and others and designed to ensure honesty and public confidence in Government contracting. Some of the ways and means adopted are indicated below: Competitive Advertising For example, R.S. § 3709. The statutes favor a wide-open, publicly conducted, mechanical process for the making of awards based solely on an objective standard such as price. Exclusion From Government Contracts "Officials-Not-To-Benefit," 18 U.S.C. § 431, 41 U.S.C. § 22 Government employees barred from certain Government contracts, 18 U.S.C. SS 437, 440, 442; 33 U.S.C. § 725. Even in the absence of an express statute, there is a general rule of policy against employees contracting with the Government which, however, is subject to exceptions (Comp. Gen. Dec. B-173988, Nov. 22, 1971). Non-regular dealers, Walsh-Healey Act, 41 U.S.C. § 35 Brokerage of Contracts No contingent fees, 10 U.S.C. § 2306(b), 41 U.S.C. § 254 (a) Assignment of contracts, 41 U.S.C. § 15 Bribery and Fraud Generally, 18 U.S.C. § 201 Anti-gratuities, 10 U.S.C. § 2207 Dual compensation, 18 U.S.C. §§ 203, 209 Anti-kickback on subcontracts, 41 U.S.C. § 51 Anti-kickback of wages, 18 U.S.C. § 874 Defective defense material production, 18 U.S.C. §§ 2154, 2156 Antitrust and Collusion 10 U.S.C. § 2305(d), 41 U.S.C. § 252(d) 40 U.S.C. § 488, 46 U.S.C. § 1224 Special Civil Remedies Debarment, Walsh-Healey Act, 41 U.S.C. § 37; Buy American Act, 41 U.S.C. $ 10b Cancellation of contracts, 18 U.S.C. § 218, 10 U.S.C. § 2207 Double or special damages, the False Claims Act, 31 U.S.C. § 231; 18 U.S.C. § 287; 10 U.S.C. § 2207; 40 U.S.C. § 328; 41 U.S.C. § 36; 41 U.S.C. § 352 (c) Conflicts of Interest 18 U.S.C. §§ 203, 205, 207, 208; 50 U.S.C. § 1436; 42 U.S.C. § 2462 Political Contribution by Contractors 18 U.S.C. § 611, as amended by Pub. L. 92-225. tain exceptions.90 Also agencies having socioeconomic responsibilities may be authorized to issue regulations affecting the operating agencies.91 Under the Administrative Procedure Act, procurement regulations, with certain exceptions, must be published in the Federal Register before they become legally binding on the public,92 though it is arguable that contractors would get the equivalent of binding notice when regulatory requirements prescribing contract clauses or award procedures are incorporated in procurement solicitations. On the other hand, by virtue of a specific exception for "grants" and "contracts," procurement regulations are not subject to the rulemaking requirements of the Administrative Procedure Act.93 Regulations Defense Emergencies Although heads of agencies have implied authority to issue regulations for the governance of programs committed to their administration, Congress generally has conferred such authority by express statute. Thus, the provisions of 5 U.S.C. § 301 generally grant to the head of an executive department or military department authority to issue regulations for his department. There are also numerous other specific statutes. Charter acts of many agencies expressly confer authority to issue regulations.87 Under 10 U.S.C. § 2202, the Secretary of Defense is required to issue regulations as a prerequisite to obligation of funds for procuring supplies.88 In the main, this requirement is satisfied by the Armed Services Procurement Regulation. Under the Federal Property and Administrative Services Act, the President, the General Services Administrator, and the heads of agencies are authorized to issue regulations covering different aspects of Government procurement. 89 The Federal Procurement Regulations are issued under this authority and are controlling on other agencies with cer The AEC is an example. See 42 U.S.C. § 2201 (p) (1970). 8 See also 10 U.S.C. § 2381 (1970). 40 U.S.C. §§ 481, 486 (a) (c) (1970). A number of statutes are addressed to war and defense emergencies, the most important including the following: Negotiation exceptions, 10 U.S.C. § 2304 (a) (1), 41 U.S.C. § 252 (c) (1), 10 U.S.C. § 2304 (a) (16) Defense Production Act, 50 U.S.C. App. § 2062, covering material priorities, guaranteed loans, strategic and critical materials, subsidies, etc. Mandatory orders and industrial mobilization, 10 U.S.C. §§ 4501, 4502, 9501, 9502; 50 U.S.C. App. § 468 Strategic and critical materials, 50 U.S.C. SS 98-98b; 50 U.S.C. App. § 2071; 50 U.S.C. App. § 2093 (g) Suspension of labor requirements, 40 U.S.C. § 276a-5; 41 U.S.C. § 40 90 For example, 40 U.S.C. §§ 474, 481 and 41 U.S.C. § 252 (a) (1970). 91 For example, the Department of Labor under the Davis-Bacon Act, 40 U.S.C. § 276c, the Contract Work Hours and Safety Standards Act, 40 U.S.C. § 331, the Walsh-Healey Act. 41 U.S.C. § 38, the Contract Services Act, 41 U.S.C. § 353; and the President's Committee under the Blind-Made Products Act, 41 U.S.C. § 47 (1970). 92 5 U.S.C. § 552 (1970). 93 5 U.S.C. § 553 (1970). Contract Settlement Act, 41 U.S.C. §§ 101125. Summary In sum, Government procurements start with statutes and are attended by statutes every step of the way from programming and award through administration and performance to payment, enforcement, and profit renegotiation. Even so, they leave many details to be supplied by Executive orders, agency regulations, and agency action. EXECUTIVE ORDERS AND DIRECTIVES 94 The President's authority under the Constitution is both direct and derivative. As Commander-in-Chief, and primate for foreign affairs, his authority comes straight from the Constitution, though checked and balanced by his need to go to Congress for appropriations and approval of treaties and war. But as Chief Executive Officer, charged with the duty to "take care that the laws be faithfully executed," his authority is generally "the creation of statutory law, with duties and powers prescribed and limited by that law." 96 His direct authority is also limited; "[I]t must be found in some provision of the Constitution." 97 However, in wartime the President's authority as Commander-in-Chief expands and he can "remove mountains," as Lincoln did with his Emancipation Proclamation, and Roosevelt with his Non-Discrimination Directive.98 Legislative delegation of authority to the President may be express; for example, where Congress wishes to give the President authority to suspend the normal operation of a law US. Const., art. I, § 8, cl. 10, § 9; art. II, § 2. 95 U.S. Const., art. II, §§ 1 and 3. The Floyd Acceptances, 74 U.S. 666, 675 (1868). 97 Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), where the court held that in peacetime President Truman could not take it upon himself to seize the steel mills during a strike, no matter what the prejudice to the country's national defense and general welfare. Exec. Order No. 8802 (1941). as President Nixon recently did under the Davis-Bacon Act; 99 where Congress wishes to allow the President to extend application of a law as under the Renegotiation Act of 1951;1 or where Congress wishes to make a law operable only at the discretion and subject to regulation of the President, as under the extraordinary authority provisions of Pub. L. 85804.2 However, the President does not need express statutory authority. As Chief Executive Officer under the Constitution, he has inherent authority to direct and control his subordinate agencies.3 Thus, although the Buy American Act provides for exemption from its requirements upon findings of unreasonable prices, etc., by "the head of a department," the President may lay down guidelines for making such findings.* Many executive controls impacting on procurement are informal, effected through meetings, discussions, budget reviews, legislative program reviews, and the network of policy dissemination provided by his Cabinet Officers, the Executive Office of the President, and the Office of Management and Budget. Other controls are formal, being promulgated as Executive orders, proclamations, reorganization plans, and Presidential memorandums. When so issued, they may directly affect the general public. For example, Executive orders are generally said to have the force and effect of statute." Executive actions like statutes serve many purposes in many ways, as indicated below. Organizational The President's powers have been used to establish new agencies such as the Department of Health, Education, and Welfare," the Veterans Administration,' the Environmental 99 40 U.S.C. § 276a-5 (1970). 150 U.S.C. App. § 1212 (a) (1970). 2 50 U.S.C. § 1431 (1970). See Congress Construction Corp. v. United States, 161 Ct. Cl. 50 (1963) and cases cited. Exec. Order No. 10582 (1954). Farkas v. Texas Instruments, Inc., 375 F.2d 629, 632 (5th Cir. 1967). "Reorganization Plan No. 1, 1953. Exec. Order No. 5398 (1930). Protection Agency, the President's Committee on Equal Employment Opportunity," the Defense Production Administration,10 the War Production Board," the War Industries Board,12 and the Office of Emergency Preparedness.13 They also have been used to reallocate functions and responsibilities. By Exec. Order No. 11246 (1965), the Department of Labor took over responsibilities for equal employment opportunity from the President's Committee, and by Reorganization Plan No. 14, it was given responsibility for labor standards enforcement. Supply Procurement, Centralization, and Coordination President Taft established the General Supply Committee and required Government-wide procurement under general supply schedules.14 President Roosevelt transferred this to the Procurement Division of the Department of the Treasury and gave it broader responsibility.15 Implementation of Specific Statutes As noted above, Executive orders often implement specific statutes; for example, authorization of departments under title II of the first War Powers Act, 1941, Exec. Order No. 10210 (1951), and under Pub. L. 85-804, Exec. Order No. 10789 (1958); requiring reporting of title II contracts, Exec. Order No. 9296 (1943); designating agencies under the Renegotiation Act of 1951, Exec. Order No. 10260 (1951), No. 10924 (1951), No. 10299 (1951), and No. 10567 (1954); guidelines under the Buy American Act, Exec. Order No. 10582, (1954); suspension of the Davis-Bacon Act, Presidential Proclamation, February 23, 1971; 'Reorganization Plan No. 3, 1970. Exec. Order No. 10925 (1961). 10 Exec. Order No. 10200 (1951). " Exec. Order No. 9024 (1942). 12 Exec. Order No. 2868 (1918). "Reorganization Plan No. 1, 1958. 14 Exec. Order No. 1070 (1909). 15 Exec. Order No. 6166 (1933). authorization of loan guarantees, Exec. Order No. 11062 (1962) and No. 10490 (1953); regulation of defense materials procurement and supply, Exec. Order No. 10281 (1951); and designating agencies to exercise no-setoff authority under the Assignment of Claims Act, Exec. Order No. 10824 and No. 10840 (1959). Socioeconomic Objectives Possibly the first exercise of Presidential authority to use the procurement process to achieve collateral national goals was in 1905 when President Taft issued Exec. Order No. 325-A prohibiting employment of convict labor under Government contracts. The one having the greatest social significance was Exec. Order No. 8802 (1941), prohibiting discrimination in employment on account of race, creed, color, or national origin. The goal of nondiscrimination has been a part of Government contracting ever since. Currently known as Equal Employment Opportunity under Exec. Order No. 11246 (1965), nondiscrimination has been extended to include age, Exec. Order No. 11141 (1964), and sex, Exec. Order No. 11246 as amended October 1968. Executive actions also have been taken to use Government contracts to promote environmental protection; 16 promote wage and price stabilization; 17 foster minority enterprise by section 8A contracting under the Small Business Act; 18 relieve depressed areas of high unemployment; 19 and promote employment of veterans.20 Patent Policy The Presidential Memorandum of October 10, 1963, was promulgated to establish a uniform patent policy under Government contracts except as otherwise required by express statutes such as 42 U.S.C. §§ 2457, 2182, and 1954b. 16 Exec. Order No. 11514 (1970). 17 Exec. Order No. 11615 (1971), No. 11627 (1971), and No. 11640 (1972). 18 Exec. Order No. 11518 (1970). 19 Defense Manpower Policy 4, Oct. 16, 1967. 20 Exec. Order No. 11598, (June 1971). |