and requirements involved are known only to such department, and a review of the acts of an executive department by an independent cffice not cognizant of the circumstances involved would be an unnecessary overlapping of functions.

There are a few desirable changes in certain other provisions of the bill to clarify the purpose and intent. They are of minor importance, however, from a business standpoint. Changes in these provisions are suggested as being a better procedure, and, bearing in mind the purpose of the bill, it would seem desirable to make it as nearly perfect as possible in its first enactment.

The first of these changes in the order written in the bill is contained in section 3, line 6, requiring a duly authenticated copy of the contracting officer's authority for the making of the contract to be filed with each contract. The dissemination of the contracting officer's authority in this form would seem to be a wasteful and unnecessary procedure. The provision elsewhere that the original shall at all times be available in the office of the contracting officer for public inspection would seem to provide a satisfactory public record of the authority.

Section 3, line 9, provides that with certain stated exceptions, no contract shall be made or obligation incurred on behalf of the United States under any contract unless the same is under an appropriation adequate for its fulfillment. This provision might be held to be in conflict with contract authorizations, subject to later appropriations; viz, authorizations for aircraft.

Section 6 prohibits the publication of an advertisement for bids in any printed publication except upon the written authority or regulation of the head of the department concerned. The free publication of prospective purchases by trade periodicals, which is now a common practice, should be permitted to continue.

Section 13, payments, is construed as authorizing progress payments. It is suggested, however, that language be used to remove any element of doubt.

Section 14 on the subject of security prescribes separate bonds for separate purposes. One bond would avoid the overlapping and more particularly a division of responsibility. The several optional forms of bond permitted by this section do not include certified checks, which is a form of security quite frequently used. The certified check provides one of the simplest and most convenient forms of security.

Those who are concerned with the operation of any Government purchasing system recognize the need for adequate safeguards in the commitment of large monetary dealings at the disposal of Government officials. It is not argued that all handicaps be removed. On the other hand, there is a public as well as an official recognition of a need for a clear, concise, and understandable contract law, defining the rights and responsibilities of the contracting parties in clear and certain terms which can be uniformly administered on a sound business basis. Objections are raised to the several provisions of the bill because of their injury to the purpose of the bill and the far-reaching effects of the uncertainties they create.

There is now provided by law an adequate review of all contracts and the official transactions in their making, without the delays and uncertainties which would be imposed upon the executive depart

ments by the provisions of this bill. The Budget and Accounting Act (Pub. No. 13, 67th Cong.) clothes the Comptroller General of the United States with very broad powers in the review and audit of all transactions of executive departments. By this law the Comptroller General is required to make a report to Congress of every expenditure or contract made in violation of the law. The present law is believed to provide an adequate check upon all financial transactions and, bearing in mind that disputes under a contract would come before the board with the Comptroller General as the reviewing authority only when the parties to the contract cannot reach an agreement (that is, where the contractor contends that the actions. of the Government contracting officer are unduly conservative in the interests of the Government), the several objectionable provisions in the bill would seem to be opposed to the Government's best interests. Senator LOGAN. Thank you very much, captain.

STATEMENT OF FRANK HEALY, REPRESENTING THE NATIONAL RECOVERY ADMINISTRATION

Mr. HEALY. Mr. Chairman, I appear here in response to your invitation to Mr. Richberg, which was not received by us until late last night. I was unable to get in touch with Mr. Richberg, and understand he is required to appear before other committees this morning. I rather imagine Mr. Richberg would appreciate the opportunity of submitting his views in a brief or statement, if that is agreeable to the committee.

Senator LOGAN. That will be perfectly satisfactory.

Mr. HEALY. I am not sure that we are greatly interested in this bill, but I would like to call attention to the fact that it does not contemplate the possibility of codes of fair competition being in existence after June 16. I believe the bill is so drawn that it automatically restricts the liberty of a contractor who submits a bid, by law predetermined. It does not contemplate that the existence of a code might result in a situation such as arose in the early days of the National Recovery Administration, under which, we will say, the War Department would contract with a man which would be in violation of the code, and the Department of Justice would propose to prosecute him if he did proceed to perform the terms of the contract. I think Mr. Richberg would like to add some suggestions.

Senator LOGAN. I would suggest that he prepare a statement expressing his views, and send it to the clerk of the Committee on the Judiciary, so he can turn it over to the reporter to be embodied in the report. It will then be printed. We will be very glad to have him do that.

Mr. HEALY. If that is agreeable to the committee, I am sure he will be glad to do it.

STATEMENT OF H. E. COLINS, ASSISTANT DIRECTOR OF PROCUREMENT, DEPARTMENT OF THE TREASURY

Mr. COLLINS. Mr. Chairman, I do not know that I have anything that I can say that has not already been covered. I would like to invite attention to section 3 of the bill, which provides that no con

tract shall be made or obligation incurred unless the same is under an appropriation adequate for its fulfillment. Certain exceptions to that are included, but it appears that none of them provides for the making of term contracts which are entered into for the use and benefit of the several governmental departments or establishments of the Government and under which appropriations are made for their respective operations. A considerable number of such contracts have been made in the past for a large number of items in common use that have been found economical and serviceable to the Government. Provisions for contracts of that sort are essential.

As you probably know, we operate under a revolving fund, and the materials or the commodities we purchase are paid for from that fund. When issued to the various departments the appropriation of that department is charged and the revolving fund is credited. Senator LOGAN. Thank you very much, Mr. Collins. Is there anyone else from any other department?

STATEMENT OF H. A. SMITH, ASSISTANT COUNSEL AND LEGAL ADVISER, PANAMA CANAL

Mr. SMITH. Mr. Chairman, the Governor of the Panama Canal, wrote a letter to the Secretary of War under date of April 13, 1935, which was forwarded to Senator Ashurst under date of May 6. I would like to have that put in the record.

Senator LOGAN. If you have a copy of it, submit it to the reporter and it will be included in the record.

(The document referred to is here printed in full, as follows:)

Hon. HENRY F. ASHURST,

Chairman Committee on the Judiciary,

WAR DEPARTMENT, Washington, May 6, 1935.

United States Senate, Washington, D. C. DEAR SENATOR ASHURST: Upon having his attention called to the provisions: of the bill (S. 215) "To establish uniform requirements affecting Government contracts, and for other purposes ", the Governor of the Panama Canal submitted a report, dated April 11, 1935, to the Washington office of the Panama Canal in which he has set forth his objections to certain of the provisions of that bill and the similar House bill, H. R. 134. A copy of the Governor's report is attached hereto, and it is requested that careful consideration be given to the statements made therein.

The Governor strongly objects to the provisions of sections 7, 9, 10, and 11, the adoption of which in their present form has been opposed heretofore in the report of the War Department dated April 18, 1935.

The Governor suggests two amendments to the bill which have direct relation to the needs of the Panama Canal. The first amendment is to section 7 in reference to the award of contracts for the purpose of permitting decisions to be made on awards by an officer in the United States to whom the Governor, who is located on the Isthmus, will be authorized to delegate his authority in this respect. The proposed amendment reads as follows:

66

Provided, however, That when the regular station of the head of the department is located outside of continental United States, he is hereby authorized to delegate his authority under this section to such representative in the United States as he may deem advisable."

The second specific amendment which has direct relation to the Panama Canal is an amendment to except from repeal section 223 of title 2 of the Canal Zone Code which was first enacted March 4, 1911 (36 Stat. 1452), providing that the Panama Railroad Co., a Government-owned corporation, shall not be required to give bond in contracts with Government departments, and that formal contracts covering transactions between Government departments and that com

pany "shall not be required unless agreed on." The amendment suggested to accomplish the purpose desired reads as follows:

66

Page 24, section 20 (c), insert a new subsection as follows:

"(6) Section 223, title 2, Canal Zone Code, relating to the giving of bonds by and the making of contracts with the Panama Railroad Co.'"

The adoption of these amendments is recommended.

Sincerely yours,

GEO. H. DERN, Secretary of War.

BALBOA HEIGHTS, CANAL ZONE,
April 11, 1935.

S. 215; H. R. 134: To establish uniform requirements affecting Government contracts, and for other purposes.

CHIEF OF OFFICE, THE PANAMA CANAL,

Washington, D. C.

SIR: 1. Reference is made to your letter of March 7, 1935, concerning the abovedescribed bills. As requested in your letter, there follows a statement of the reasons why it is felt that certain features of this proposed legislation should not be made applicable to contracts for articles for the Panama Canal.

2. It is desired to state preliminarily that the unique character of the Panama Canal, both as to its geographical situation and the unusual nature of the services performed by it, has repeatedly been recognized by Congress in legislation affecting the Canal Zone and the Panama Canal. There are two fundamental objections to making the principal features of the bill applicable to the Panama Canal:

First, the Panama Canal, in the nature of its operations, is required to procure an extremely varied assortment of equipment and supplies for ultimate disposition, directly or indirectly, to vessels using the Canal or in furnishing service to such vessels. These operations are necessarily upon a commercial basis and generally overshadow in importance the procurement of supplies for consumption and use in the ordinary processes of governmental administration,

Second, the Canal Zone is remotely removed from the United States and for that reason there is a large and unavoidable loss of time even under best conditions between the determination of the need for procurement and the eventual award for the purchase of equipment and supplies. Because of the pressing

needs of vessels using the Canal which are largely supplied by the Panama Canal, and of the Canal organization itself, no handicaps should be placed upon the efforts of the Panama Canal to anticipate and supply the needs of these vessels engaged in world commerce. In respect to the vessels using the waterway, the Panama Canal is largely a commercial enterprise and as such must keep abreast of approved commercial methods insofar as possible if the Canal is to discharge its obligation to furnish adequate service to world commerce.

3. There follows below more detailed comment on those features of the proposed legislation which seem particularly objectionable insofar as concerns their application to the Canal organization.

SECTION 7. AWARD OF CONTRACTS

4. This section contains three provisions which represent a wide departure from existing procedure:

(a) That bids shall be opened and "award made with reasonable promptness after the lapse of 7 days, unless a public emergency will not permit of such a delay."

(b) That no award shall be made while a written protest "challenging the legality or regularity of the administrative procedure of any bid, is undetermined by the Comptroller General

*

(c) That award shall be made "to the lowest responsible bidder whose bid conforms to the specifications."

5. The objection to the first two provisions referred to above is the material delay which will be caused in procurement. It is to be noted that section 5 of the bill requires that at least 10 days shall be allowed for the filing of bids. Section 7 requires that a further period of 7 days shall elapse before the award is made, with the further provision that in no case shall award be made, if a protest has been filed, until the protest has been determined by the Comptroller General. These provisions should not be made applicable to the Panama Canal as the resultant delays would be particularly serious in the case of

contracts for supplies used directly by or for vessels using the Canal. As has been stated, the Canal is remote from the place of procurement and even under best conditions an unreasonable length of time frequently elapses before needed supplies can be delivered on the Isthmus. The further material delay which would be caused by the provisions referred to above would have a decidedly unfavorable effect on the proper maintenance and operation of the Canal and there would be no compensatory advantage resulting therefrom. The provision that an award shall not be made until any challenge has been determined by the Comptroller General seems highly objectionable, since no protection is afforded the Government against the filing of protests entirely lacking in merit by dissatisfied bidders merely to cause delay and inconvenience. It is apparent that the public business might be seriously impeded by the adoption of this provision.

6. The provision that award shall be made to the lowest bidder whose bid conforms to the specifications would be unobjectionable if it were humanly possible to draft specifications so perfectly, either by detailed description of the required article and of its component materials or by a statement of what the article is to accomplish, as to permit by inspection and tests under these specifications the division of all makes of the articles into two classes, viz, those which will serve the desired purpose efficiently and economically, and those which will not. It also assumes that, having thus divided the articles into two classes, the article which complies with the specifications and on which the bid is lowest is the most economical. These assumptions are true in the case of many commodities to a sufficient extent to permit satisfactory results under the present and proposed systems of procurement; for example, cement. reinforcing steel, and lumber. Many of the commodities suited to this method of procurement are covered by Federal specifications, by specifications of the American Society for Testing Materials, or by other standard specifications. However, in purchasing the thousands of separate items necessary for the proper operation and maintenance of the Panama Canal which are not covered by standard specifications, it is obviously impracticable to have all the specifications prepared by specialists, and in some instances it has been found impossible, even with the best expert assistance, to prepare satisfactory specifications. As a result, cases arise at times when the interests of the Government demand the rejection of the lowest bid, although the article offered conforms to the specification.

7. The simple fact is that some of the required qualities of certain classes of commodities can be covered by specifications and verified by inspection and tests, but other qualities can only be ascertained by experience with the articles in service. As an example of the difficulty of securing satisfactory materials by specifications alone to meet the conditions on the Isthmus, there may be cited the purchase of large steel cables (24 and 31⁄2 inches in diameter) for the main hoists of the 15-cubic yard dipped dredges. Every possible test, including those suggested by the Bureau of Standards, has been tried, but without success in separating the satisfactory from the unsatisfactory. The difference between cables shows up in service, undoubtedly due to flexure and wear, in a manner which cannot be reproduced in an acceptance test. The length of time required to recover the dipper from the bottom and change the cable after breakage is an important item in the greater cost of dredging when short-lived cable is used. and the breakage of inferior cable during emergencies, such as slides which block the Canal, may have a serious effect in delaying shipping.

8. Another example of the impossibility of preparing specifications for important materials is that of the enamel used as a protective coating for the gates, valves, and other metal equipment at the locks. Each lock is given a general overhaul every 4 years, and as it is not possible to inspect or repair the submerged parts between overhauls. it is of vital importance that the protective coating shall remain unimpaired during the 4-year period. If it does not, either serious deterioration and early failure of the gates and valves will take place, or the time between overhauls must be shortened to 3 or 2 years or even less, with greatly increased expense to the Government and interference with shipping. Exhaustive studies and tests have been made by the Bureau of Standards, various manufacturers, and the Panama Canal, in an effort to formulate detailed specifications which will insure a satisfactory material for this purpose, but without success. It has been the policy of the Panama Canal for several years to accept samples of protective coatings and make actual service tests on the upper portion of the lock gates where the coatings can be renewed without draining the locks. To date 27 materials of various composi