PRINCIPAL FEDERAL PROCUREMENT STATUTES

There are 25 key statutes which deal with the procurement of goods and services by Federal departments and agencies. Three of these cover the subject directly; the balance affect procurement collaterally and are considered ancillary. In addition, each agency concerned with procurement has adopted implementing regulations which have been characterized by the Comptroller General as “voluminous, exceedingly complex and at times, difficult to apply."

Major Statutes

The three basic statutes governing Federal procurement are the Armed Services Procurement Act of 1947, as amended (10 U.S.C. 2301–2314), the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 471-524; 41 U.S.C. 251-260) and section 5 of title 41 U.S.C. (Rev. Stat. 3709).

The Armed Services Procurement Act contains the basic procurement laws to be followed by the Department of Defense and the National Aeronautics and Space Administration. The Federal Property and Administrative Services Act, which created the General Services Administration, provides for the management and disposal of Government property and for procurement contracting and property management activities of civilian executive branch agencies. It supplements contracting requirements and procedures for those civilian agencies which are not within the purview of the Armed Services Procurement Act.

Section 5 of title 41 U.S.C. was the only general procurement law prior to the enactment of the other two statutes. Originally enacted in 1875, it requires procurement by advertising, unless exempted by law or appropriation, or if certain other circumstances are present. It is still applicable to Federal procurement, to some extent, but the Administrator of the General Services Administration, pursuant to 41 U.S.C. 252 (a) (2), has made a blanket delegation of authority to all agencies (except DOD and NASA), to use the Federal Property Act authority. Ancillary Statutes

The other 22 statutes concerned deal with such matters as the authority of the Comptroller General with respect to procurement claims and adjustments: consideration for small business, priorities and allocations of materials and facilities in the performance of defense contracts; freedom of information with respect to efforts by the public to obtain certain records and documents from Federal agencies; assignment of claims; jurisdiction of Federal courts in contract suits; Presidential authority to authorize extraordinary contracts to facilitate national defense; finality of decisions of agency heads with respect to certain contract provisions; performance bonds; renegotiation; prohibitions against the use of convict labor and compliance with wage, hour and child labor laws; compliance with various safety-requirement laws; Buy American Act requirements; conflict-of-interest statutes; and others.

PRIOR LEGISLATIVE ACTION

In the 90th Congress, this committee had before it a bill, S. 1145, which was virtually identical to S. 1707. The House Committee on Government Operations. following hearings on several similar bills, reported favorably a new bill, H.R. 12510 (H. Rept. 890, 90th Cong.). Since no further action was taken by the House of Representatives, this committee did not act on S. 1145.

In the 91st Congress, the Military Operations Subcommittee of the House Government Operations Committee held extensive hearings (9 volumes) on H.R. 474, a companion bill to S. 1707, and final favorable action on H.R. 474 is expected in the near future.

AGENCY COMMENTS

Agency comments on S. 1707 were requested from all of the cabinet departments, the Bureau of the Budget, the Atomic Energy Commission, the National Aeronautics and Space Agency and the Comptroller General. In general, all agreed that the Federal Government would benefit from the comprehensive review of Federal procurement policies and practices which is provided for in the bill. However, some of the agencies queried suggested modifications or amendments which will be discussed in a subsequent section devoted to proposed amendments.

The Bureau of the Budget stated that “*** a broadly representative commission all of whose members would be appointed by the President would be preferable to the approach taken in S. 1707." The Bureau further recommended that such a Presidential commission should consist of fewer than 15 members, and suggested that "a smaller commission-for example, nine members-might be easier to organize and more efficient in the conduct of its business." The Bureau also recommended an amendment relative to the rate of compensation for Commission members from outside the Federal Government, which will be discussed below.

The Department of Labor suggested that section 1 of S. 1707 be modified to recognize the role of Government contracts as a proper instrument of social policy, including Federal small business, anti-discrimination and labor standards policies.

The Department of Justice suggested technical amendments and called attention to the absence of subpoena powers in the proposed Commission.

The Post Office raised a question pertaining to the effect of section 510 of Public Law 90-479 on section 7 of the bill which provides that any Government department or agency may provide services to the Commission at its request on such basis, reimbursable or otherwise, as may be agreed between the parties. Section 510 of Public Law 90-479 (Public Works for Water and Power Resources Development and Atomic Energy Appropriation Act, 1969), in effect, prohibits the use of appropriated funds to finance interdepartmental commissions "which do not have prior and specific congressional approval of such method of financial support." The Post Office concluded, however, that "we do not comment on whether the provision in the bill for payment for services on a 'reimbursable or otherwise' basis is an appropriate one in view of the general policy of P.L. 90-479."

The Comptroller General stated that,

"Our work in the procurement area indicates that there is room for improvement in Government procurement practices and procedures, and confirms the need for a broad across-the-board investigation and study. In our opinion Government procurement is so burdened with complex statutes and regulations and is so inter-related with other governmental, social and economic programs and policies that a Commission with a broad mandate for study could suggest substantial improvements in procurement procedures which would benefit both Government and business."

The Comptroller General then stated the reasons for GAO's position, as presented at the House hearings, as follows:

the piecemeal evolution of Federal procurement law is generally designed to solve or alleviate specific and sometimes narrow problems as they arise, Federal procurement statutes are chiefly concerned with procurement authority and procedures and do not contain a clear expression of Government procurement policies,

implementing procurement regulations are voluminous, exceedingly complex, and at times difficult to apply,

these procurement regulations have great impact on the rights and obligations of contractors, and

the high level of spending for Government procurement, for fiscal year 1968 the Department of Defense alone awarded contracts totaling about $43 billion for supplies and services, representing about 80 percent of total Government procurement expenditures.

In addition, attached to his letter was a copy of an appendix to his comments at the House hearings, setting forth some of the problem areas in Government procurement which the GAO recommended for consideration by the proposed Commission. A copy of this document is attached hereto as an appendix.

STAFF COMMENTS RELATIVE TO PROPOSED AMENDMENTS

Bureau of the Budget

As previously indicated, the Bureau of the Budget suggested that the proposed Commission on Government Procurement be reduced in size and that all of its members be appointed by the President; a membership of nine was suggested as possibly providing the optimum in organization and efficiency in the conduct of its business. In addition, the Bureau recommended that the rate of compensation for Commission members from outside the Federal Government and for temporary

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experts and consultants be fixed at the daily equivalent of the rate for GS-18, instead of $100 per day.

The suggestion that the proposed Commission be a Presidential rather than a mixed commission was offered by the Bureau of the Budget and rejected by the House Committee on Government Operations in the 90th and the 91st Congresses. It appears that since the subject of the study and investigation which is to be undertaken by the Commission would involve practices and procedures followed by executive branch departments and agencies, a mixed commission with congressional participation in both the appointment of members and in the work of the Commission might be more effective. Furthermore, since the Commission is expected to recommend changes in existing law, congressional participation might assist materially in the acceptance and implementation of such recommendations.

It may be noted that the Secretary of Defense has recently created a commission (Fitzhugh Commission) to study various DOD activities including, among other subjects, DOD procurement policies and practices.

In support of its recommendation relative to the rate of compensation, the Bureau stated that the use of its proposed language would maintain the compensation for private members of the proposed commission and the maximum payable to experts and consultants at the highest rate under the General Schedule; and the use of this language would have permitted an increase in the per diem rate, in accordance with the recent salary increase, which the flat $100 would not have permitted without additional legislation.

It appears that membership on mixed commissions of this type is usually considered to involve a considerable degree of prestige, and the honorarium is thought to be secondary in importance. Since membership and service as an expert or consultant are both temporary in nature, the per diem authorized is not believed to be of any controlling importance and $100 per day should be sufficient in either case. In addition, legislation which relates the rate of pay for such temporary service to the highest rate under the General Schedule may serve as an undesirable precedent for future bodies of this type. In any event, both of these recommendations involve questions of policy for the committee's determination.

Department of Labor

This Department suggested that section 1 of the bill modified to recognize the role of Government contracts as a proper instrument of social policy, including Federal small business, anti-discrimination and labor standards policies. This modification appears to be unnecessary in view of the language of section 1(8) of the bill which states, as congressional policy in connection with the Commission's studies, "conforming procurement policies and programs, whenever appropriate, to other established Government policies and programs."

It appears that this language is sufficiently broad to cover the areas concerned and any attempt at more specific language might serve to deprive the Commission of necessary flexibility.

Department of Justice

The Department called attention to the omission of subpoena powers for the Commission. Subpoena powers have been given to some mixed commissions and denied to others. Thus, although subpoena power was not given to the first Hoover Commission, it was conferred upon the second Hoover Commission.

It appears that this omission was deliberate with respect to the companion bill in the House, since it was felt by some that its inclusion might impair the successful passage of the measure. In view of the nature of the work of the proposed Commission, however, it is suggested that subpoena power be authorized. Appropriate amendments have been drafted which will correct technical errors, clarify language and confer subpoena power upon the Commission, in the event that the committee desires to make this change.

Post Office

The suggestion of this Department has been detailed in the preceding section of this memorandum. An analysis of the statute involved indicates that the language contained in section 7 of the bill appears to meet the legal requirements cited by the Post Office.

Approved:

JAMES R. CALLOWAY,

Chief Counsel and Staff Director.

ELI E. NOBLEMAN, Professional Staff Member.

GENERAL ACCOUNTING OFFICE

APPENDIX

The 10 items set forth in section 1 of the bill are broad and significant areas for study in Government procurement. Within the framework of these 10 items, we suggest that the following specific subjects would be worthy of consideration by the Commission:

1. Government policies in regard to the use of formal advertising and negotiation procedures. Are these policies being uniformly and correctly applied by the procurement agencies and do they result in the procurement of supplies and services at the lowest reasonable cost to the Government?

2. Methods used by procurement agencies in formulating, reviewing and approving procurement regulations.

3. Government programs and policies in regard to (1) labor surplus area set asides, (2) small business set asides, (3) Buy American Act, (4) labor standards and minimum wage provisions, and (5) furnishing Government-owned facilities. What effect do these programs have upon the economy, efficiency and effectiveness of procurement?

4. Sources of supplies and services.

A. Government policy concerning procurement of supplies and services (personal and non-personal) from Government as against private commercial sources.

B. Policy with respect to the use by Government contractors of Federal supply sources.

5. Consideration of ways and means of facilitating the procedures surrounding contract negotiation with a view towards making them less burdensome and more timely.

6. Consideration of ways by which paperwork associated with procurement could be reduced and simplified. In this connection a study could be undertaken to determine whether bid and offer solicitation documents could be simplified and more clearly drafted in order to give Government suppliers better notice of any unusual contract conditions and requirements.

7. Inquire into the need to define more fully (1) the extent to which contractors are permitted to use Government-owned tooling and equipment on commercial production, and (2) the basis for the establishment of equipment rental rates.

8. Should there be an overall Government policy as to the extent the Government should share in contractor's independent research and development costs? 9. Patents and proprietary data.

A. What should the respective rights of the Government and the contractor in items developed under Government contracts where a substantial portion of the development costs have been borne either directly or indirectly by the Government?

B. Should the Government's procurement of patented or proprietary components or items be made on a competitive basis or restricted to the firm to which the item is proprietary or which holds the patent?

C. Inquire into the procedure under which the Government acquires rights to proprietary data and the use by the Government of contractor's proprietary data in procurements from other sources.

10. Access to records.

A. Is the legal authority for access to contractor's records by Government representatives adequate to discharge the duties placed upon them by the Congress?

B. Are the laws relating to access to records sufficiently clear to insure recognition by all parties as to the types of records that may be examined? 11. Public Law 87-653 ("Truth in negotiations" statute).

A. Examine the experience under the act to determine whether such experience indicates a need to change the act or its implementing regulations. B. Should the statute be made expressly applicable to civilian agencies? C. Is there consistency in implementation of the act by procurement agencies?

12. Undertake a study of minimum wage requirements as they relate to Government contracting.

13. Undertake a study of Government debarment procedures, both under statutory and administrative authority, to determine whether these procedures are fair and afford adequate safeguards to contractors against unwarranted debar

ment.

14. Administrative settlement of claims under the standard Disputes clause. A. Is there a need for greater uniformity in procedures and decisions of contract appeal boards? If there is such a need, would the establishment of one or two Government-wide appeal boards satisfy such need?

B. Should a procedure be established under which the Government would have an adequate right of review of adverse decisions by contract appeal boards similar to that presently enjoyed by contractors?

C. Examine the need and feasibility of developing suitable contract clauses to provide an administrative remedy for all contract disputes and, thus, avoid fractionalization of remedies.

15. Subcontracts.

A. Undertake a study to determine whether the no-privity rule should be relaxed in order to afford subcontractors direct access to the Government in the presentation of claims.

B. Undertake a study to determine whether it would be desirable or feasible for the Government to take an active role in assisting subcontractors and protecting them from possible abuses by prime-contractors.

OPENING STATEMENT OF SENATOR JACKSON

Senator JACKSON. S. 1707 is modeled on legislation developed by Congressman Chet Holifield of California, and was first introduced in the Senate in 1967. Comparable legislation is now pending before the House Government Operations Committee which has held extensive hearings on the bill this year.

S. 1707 authorizes a comprehensive review of Government procurement policies. It sets forth a congressional policy to promote economy, efficiency, and effectiveness in the procurement of goods, services, and facilities by and for the executive branch of the Federal Government. In pursuit of this objective the Commission on Government Procurement will study existing statutes, regulations, and procedures affecting procurement. Within 2 years it will recommend reforms to the Congress.

When I first introduced this proposal in the 90th Congress I pointed out that "the time has come for a close, hard look at the statutes, regulations, procedures and practices governing Federal procurement. There are loopholes in the laws, inconsistencies in the regulations, conflicts in the procedures, and variations in the practices. The mountain of procurement paperwork grows taller, the maze of procedures more complicated with each passing day."

What was said certainly in 1967 is even more true today. The fact is that there has been no overall review of Federal procurement policies since the first Hoover Commission filed its report in 1949.

The two basic statutes governing procurement were enacted more than 20 years ago. In the meantime there has been a massive proliferation of new programs and new agencies to run them. During this same period the dollar value of procurement awards has risen dramatically. In the fiscal year 1968 the Federal Government spent $55 billion for the procurement of goods and services.

In light of this history, it is time for Congress to reassert its authority and to establish a clear-cut procurement policy for the executive branch. Hopefully the studies authorized by S. 1707 will lay the groundwork for basic reforms of benefit to the Government, to business, and to the taxpayer who foots the bill and procurement.

The committee is happy to welcome as its first witness today the Comptroller General of the United States, Elmer B. Staats.