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prescribe the criteria to be followed. The other restrictions and requirements contained in Public Law 85–804 would continue to apply.

In proposing this extension of Public Law 85–804, we have considered the possibility that excessive use of the authorities provided in the act might undermine important requirements of other statutes and sound procurement policy. We believe this is highly unlikely in view of the specific controls contained in the act and the implementing regulations. A major function of the act has been to compensate for gaps in routine procurement authority which inevitably arise, and its future utilization should continue on this basis.

In eliminating the single objective of “facilitating national defense,” it also will be important that criteria be established for certain types of actions—such as amendments without consideration in essentiality cases. We believe these criteria should be left to the regulations prescribed by the President, and could be developed by the Office of Federal Procurement Policy.

Recommendation 5. There is already other provision for correction of mistakes, and informal commitments may generally be formalized by the ratification of the commitment by an authorized Government official. While these actions may perhaps be handled somewhat more expeditiously under the Public Law 85– 804 procedure, there seems little purpose in extending the duplication beyond the terms of the present statute. The other available actions under the law are generally also of the type most appropriate for use within the limits established by the present act.

Reports to Congress

Recommendation 24. Revise existing requirements in Public Law 85–804 on reporting to Congress.

Recommendation 23. Incorporate Public Law 85-804 into the primary procurement statute.

Maintaining Public Law 85–804 separate from the primary procurement statutes seems to serve no special purpose if the statute is to have Government-wide application. Accordingly, we believe the provisions of this act should be integrated with the basic procurement statute recommended in Part A, Chapter 3.

Public Law 85–804 requires that completed actions involving the exercise of the powers provided for in the act be reported to Congress annually.70 To keep Congress informed of the expenditure of large sums of money pursuant to the exercise of special management powers we recommend that contracting agencies be required to inform Congress prior to taking any action that would obligate the United States for an amount in excess of $1 million. In all other instances we recommend that the contracting agencies continue to make reports to Congress about all actions taken under the contractual fairness and special management powers in the same manner as is now provided in Public Law 85–804.

One Commissioner believes $5 million represents a more realistic figure for the threshold reporting requirement to Congress.

Dissenting Position: Recommendations 21-23

Administration of the Authority

One Commissioner does not favor these recommendations for the following reasons:

The modification of a contract without consideration is an extraordinary legal remedy which reasonably should be limited to promoting the national defense in time of emergency. The settlement of breach of contract claims would be possible under the broadened powers available to the procuring agencies and administrative disputes-resolving forums under

In defining the types of authority delegated to contracting agencies by Public Law 85–804 and the situations in which that authority may be used, the implementing regulations do not

70 50 U.S.C. & 1434 (1970).

take into account the different judgments required in its administration.:1 In practice, however, it has been discovered that determinations under the act often are made by the type of decisionmaker who is most capable of and most appropriate for that judgment, whether or not he is the decisionmaker de jure.

One study has shown that in a request for an amendment without consideration based on the essentiality of a contractor to a defense contract, a contract adjustment board usually will consult agency personnel who have overall management responsibility for the agency's programs and then make a determination in accordance with the managerial response that is given."2 “In this type of case,” the study states, “the Board brings little or no judgment to bear on the critical issue.”

In contrast, if the issue is one of ultimate fairness to the contractor, the boards have been found to be very much involved. In correction of mistake, breach of contract, and formalization of informal commitment cases, the practice of the boards has been to rely on their own judgment. “In a somewhat legal context, the Board seeks to find out what is fair under the circumstances and acts accordingly. Such cases are of the same nature as

many which are routinely handled by Boards of Contract Appeals under the Disputes clause." 73

ASPR and FPR do not provide for an appeal to the contract adjustment board after denial of a request for adjustment by a management official.14 When a case is before the board, the contractor generally does not have the right to confront other witnesses; rebuttal of evidence is discretionary; and documents are withheld or disclosed only under special circumstances. Thus, a contracting party may not know the nature or particular thrust of the evidence against him.

Most likely this practice has occurred because it has been stated generally that the exercise of Public Law 85–804 powers is discretionary with the Government and the contractor has no right to relief.75 Our analysis shows, however, that this is true only for the special management powers. The cases involving contractual fairness stem from well-known legal causes of action for which relief can be sought in a court of law and accorded a due process, adversary hearing. If the purpose to be served by this authority is to be achieved, a contractor should be granted the same objective consideration of his request for relief.

One set of agency regulations (AEC) now recognizes the two main categories of authority under Public Law 85–804.16 We believe that adminstration of the act would be improved if the implementing regulations were revised along similar lines.

11 In the Department of Defense, certain specified “heads of procuring activities” have been delegated authority to approve or direct an appropriate action which will correct a mistake or formalize an informal commitment, except where such action will obligate or release an obligation to the Government in excess of $50,000. The form of relief which may be granted, however, is limited to the examples contained in the regulations. A head of a procuring activity may deny any request for a contractual adjustment, including an amendment without consideration. See ASPR 17-203.

12 Report to the Atomic Energy Commission By Its Advisory Panel on Public Law 85–804 Authority, Feb. 24, 1969 (unpublished report in the files of the Atomic Energy Commission) at 3 (authors of the report are Valentine B. Deale, Esq.; William Mitchell, Esq. (former AEC General Counsel); and Ralph C. Nash, Jr., Assoc. Dean, National Law Center, The George Washington University).

73 lbid.

74 The AEC regulations do provide for such appeals. See AECPR 9–17.207-50 (b).

78 See, e.g., Reda, Unorthodox Avenues of Contractual Relief, 12 AFJAG L. Rev, 222, 226–27 (1970).

76 See AECPR Part 9-17.


Debarment and Suspension Procedures'

Debarment and suspension are actions taken to prevent Government contractors, or potential contractors, from bidding on, entering into, or continuing to perform Government contracts. The purpose of these actions is to terminate business relations for varying periods with nonresponsible, defaulting, or dishonest contractors. Debarment is based on the violation of a statute or regulation and is provided for by both. Suspension may be based on suspicion of violation of certain statutes and regulations but is provided for only in the regulations.


the Secretary of Labor makes the determination.

The General Accounting Office (GAO) has established criteria 5 for the reports it requires as a basis for the Comptroller General's debarment determination under Davis-Bacon. The GAO criteria require a chronological narration of facts, copies of investigative reports, exhibits, and correspondence; explanations of actions taken by offenders; and any additional information and evidence. The recommendation of the agency concerned and that of the Department of Labor are requested, but the Comptroller General's decision is based on findings and recommendations developed in accordance with the GAO criteria and the rules of practice of the Department of Labor.

The Department of Labor rules 6 for recommending debarment for a Davis-Bacon Act violation and for determining whether debarment is justified under one of the related acts provide for (1) notifying the contractor or subcontractor of the violation, (2) a summary of the investigative findings, (3) "an opportunity to present such reasons or considerations" as the parties may have to offer opposing debarment, (4) an informal hearing before a hearing examiner, regional wage and hour director, or “any other Departmental officer of appropriate ability,” and (5) an appeal from an adverse decision in the foregoing hearing, if requested, to the Solicitor of Labor (recently delegated to Administrator, Employment Standards Administration) who may “in his discretion ... permit oral argument."

The Davis-Bacon Act ?

This act requires a construction contractor performing under a Government contract to pay wages at rates set by the Secretary of Labor. Failure to do so may result in the contractor's debarment for three years. About 40 related statutes 3 call for similar wage determinations, and debarment for a period “not to exceed 3 years” can result from failure to pay the established wage rates.

In the case of Davis-Bacon violations, the Comptroller General makes the debarment determination; in cases under the related acts,

1 See Part A, Chapter 11, for a discussion of debarment policies in relation to socioeconomic problems. 2 40 U.S.C. $$ 276a-276a-5.

3 See, e.g., Federal-Aid Highway Act of 1956, 23 U.S.C. $ 113(a) ; National Housing Act, 12 U.S.C. $ 1716c; Urban Mass Transportation Act of 1964, 49 U.S.C. $ 1609; and Airport and Airway Development Act of 1970, 49 U.S.C. $ 1722(6) (1970).

* See 29 CFR § 5.6(b) (1) (1972).

Ms. Comp. Gen. B-3368, Mar. 19, 1957 (rescinds Circular Letter A-34106).

& See 29 CFR $ 5.6(c) (1972).

Walsh-Healey Public Contracts Act 10

The decision on this appeal includes findings, conclusions, and a recommendation or order for debarment. The Solicitor's recommendation or order for debarment is final unless the case is “accepted for review” by the Wage Appeals Board.

The foregoing rules of practice appear to have these weaknesses:

• The file on which the case is built is essentially ex parte, subject to internal guidelines that are neither available to the challenged contractor for examination nor for rebuttal of findings or confrontation of witnesses. • The nature of the presentations to rebut a proposed debarment, whether by oral hearing or another procedure and whether or not allowing other adversary-type practice, is discretionary with the Department of Labor. • Functions are not clearly separated as between officials who propose debarment and those who decide the matter. • Final steps in the formal rules governing appeals are discretionary with the Department of Labor.

The Walsh-Healey Act applies to contracts for supplies in excess of $10,000 and provides for debarment for breach of any of the agreements or representations required by the act. The period of debarment can extend for as long as three years.

Rules of practice for investigation of the facts and determination of the debarment " differ significantly from those for proceedings under the Davis-Bacon and related statutes.

After a breach or violation of Walsh-Healey is reported to a local or regional office of the Department of Labor a formal complaint is issued, a date is set for a hearing before a trial examiner, and a time is also set for answer (which must contain a “concise statement of the facts” rather than a simple denial). Whether or not an answer is filed, a hearing is scheduled and the case proceeds. The rules provide for motions by all parties to the hearings, for intervention, and, on the application of any party, for the subpoena of witnesses. Detailed provisions are made for the conduct of the hearing by a trial examiner who shall have no other duties inconsistent with his duties and responsibilities as an examiner. Ex parte proceedings are specifically prohibited except upon proper notice and opportunity to participate. The rules also provide for confrontation and examination of witnesses, cross-examination, and introduction of documentary and other evidence. In short, these rules sharply curtail the discretionary rights of the Government.

Upon issuance of the trial examiner's order and decision embodying his finding of facts and conclusions of law on all issues, the contractor may petition for a review. When review is requested, the Administrator of Workplace Standards issues an order denying the review or announces his review decision. If the contractor is found in violation of the act, he may petition the Secretary of Labor for relief from the ineligible list provisions. The petition must be filed within 20 days of service of the trial examiner's decision or of the Administrator's review decision. In the absence of such a petition, the trial examiner's

Contract Work Hours and Safety Standards Act®

This act applies only to overtime earnings. The rules of practice are the same as those for the Davis-Bacon related statutes; however, the Work Hours Act also provides a right of appeal on the question of liquidated damages assessed against a contractor or subcontractor found in violation of the act. If such contractor does not prevail in the appeal, which by the terms of the act goes eventually to the Court of Claims, it may yet be debarred for overtime violation by the Secretary of Labor." Hence, the comments offered above are applicable.

7 29 CFR § 5.6(c)(3) (1972). For such a case involving a DavisBacon recommendation see Framlau Corp. v. Dembling, No. 72-1156 (E.D. Pa. June 14, 1972).

* 40 U.S.C. 88 327-33 (1970).
9 29 CFR § 5.1 (1972).

10 41 U.S.C. $$ 35-45 (1970).
11 See 41 CFR Part 50–203 (1972).

decision becomes final, and the contractor is debarred by the Secretary of Labor.

Thus, the rules of practice are similar to those used in the courts, except that, as is common in administrative hearings, formal rules of evidence are not required.

Service Contract Act of 1965 12

This statute governs wages, fringe benefits, and working conditions of service employees and authorizes debarment of contractors by the Secretary of Labor for violations of the statute. The act also requires the Secretary to follow the procedures specified under the Walsh-Healey Act.

limited debarment of contractors convicted of an offense as defined by the act. The pertinent provision does not use the term debarment, but it produces the same effect. It prohibits Government agencies from contracting for goods, materials, and services when performance of the contract would be “at any facility at which the violation which gave rise to such conviction occurred [the limitation referred to above) if such facility is owned, leased, or supervised” by the violator.

The statute requires the President to issue an order to implement the purposes and policy of the act by prescribing relevant procedures, sanctions, and penalties, and by requesting all Federal agencies to apply the provisions of the act in their grants, loans, and contracts.

Executive Order 11602 of July 1, 1971,15 is the implementing order. It assigns responsibility for attainment of the purposes and objectives of the act to the Administrator of the Environmental Protection Agency (EPA). These responsibilities of EPA specifically include: (1) designation of facilities that have given rise to conviction under the act and circulation of a list of such facilities to all Federal agencies and (2) issuance of standards and rules for effectuating the purposes of the statute, and the Executive order.

Actions for violation of pollution standards are brought in the U.S. district courts and, upon conviction, the violator is debarred from participation in the procurement process. In such an action judicial rules of practice would, of course, pertain. However, the act charges EPA with gathering data for control plans, compliance determinations, and for other purposes from those subject to the act, including suspected violators. Decisions are to be made on the basis of "information available to [the Administrator].” EPA is still in the process of formulating the rules of practice for carrying out these functions.

Buy American Act 13

This act requires contractors to use only materials produced in the United States, although certain exceptions are provided for based on findings of an agency head. A construction contractor on a Government project who fails to comply with the requirements of this act can be debarred for three years after a finding of violation is made public by the agency head.

Violation of Buy American provisions by supply and service contractors is not treated by the act itself but is a basis for debarment under agency regulations. Rules for factfinding and determination of a violation of the Buy American Act are the responsibility of the contracting agency.

Clean Air Act 14

Federal Water Pollution Control Act Amendments of 1972 10

This act establishes and defines the Federal role in a national program to improve the quality of air resources through prevention and control of air pollution. It provides for

This act establishes and defines the Federal

12 41 U.S.C. $$ 351-57 (1970).
13 41 U.S.C. $$ 10a-10d (1970).
14 42 U.S.C. $8 1857-58a (1970).

15 3 CFR at 568 (1972).

16 Pub. L. No. 92-500, amending the Federal Water Pollution Control Act, 33 U.S.C. $8 1151-1175 (1970).

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