2, line 3. The bill as at present drafted refers to "all persons hereafter employed." That term "hereafter", if it means from the effective date of the passage of this bill, will cause us a great deal of trouble. If it means all persons thereafter employed, I do not think it is nearly so objectionable. In other words, take my own industry, and suppose, as we had last summer, we could have an invitation to bid on certain prunes, I believe it was, to be used in Government relief work. Of course, they had in their bins, in their storehouses, tons of prunes which had been harvested, picked, and that were simply ready for packing. They do not know, and have no way of knowing, just how those prunes have been processed, whether the provisions of this act, for instance, have been complied with.

The dried-fruit industry is really divided into three parts, the grower himself, who is the farmer, the dry-yard man, who dries them commercially, and a great many of the farmers have their own drying yards and, finally, the packer, who is the man who puts them up in the final form for market consumption.

There would be no way in the world for that packer to know that that fruit which was being bid on had been prepared in compliance with this act, and if it had not been so prepared, he stands in a position of being greatly penalized or else being cut out of bidding at all. If that means thereafter, then all he has to do is to know that when he packs those goods, that the maximum hours and the minimum wages are provided; that is something over which he has direct control. But otherwise he does not know-he cannot separate those prunes, apricots, pears, and peaches in his bin.

Mr. Chairman, I recognize that the committee wants to go, and I thank you very much.

Mr. HEALEY. Thank you.

Is there someone here from the Comptroller General's office?

STATEMENT OF 0. R. MCGUIRE, COUNSEL FOR THE COMPTROLLER GENERAL

Mr. HEALEY. Mr. McGuire, have you with you certain statutes that apply to Government purchases?

Mr. MCGUIRE. Yes, sir; I have some statutes here that apply to Government contracts.

Mr. HEALEY. I wonder if you will refer to them. We may want to put them in the record. Will you allude to the various provisions that do apply to Government purchases, and if you care to make any remarks in reference to them, the committee would be very glad to hear you.

Mr. MCGUIRE. I will tell you, Mr. Chairman, that the letter from the committee only came to us this forenoon and, of course, we have had no time to prepare on the matter, and we understood that the committee desired to question someone from the office who was familiar with the contracts, The general counsel and I are here so that the committee may question us as to the existing law applicable to Government contracts.

We have no particular statement to make, either for or against the bill. Of course, whether there shall be such legislation is a ques

tion of policy for the Congress, but we are here to answer any questions that the committee may have in mind with respect to the existing law.

Mr. HEALEY. Well, have you got all of the existing laws or statutes that apply to Government purchases?

Mr. MCGUIRE. I have most of them. I think that you will find most of the statutes up to date in Title 41 of the United States Code. There are some specific statutes applicable to the Army, Navy, Post Office Department, etc., respectively, in the appropriate titles of the United States Code. They are readily available to you, if you want to look at them, but I will be glad to call your attention to any feature of the existing law you may have in mind or concerning which you may desire to be informed as to the practice thereunder.

Mr. CHANDLER. Have they been compiled separately?

Mr. MCGUIRE. The Bureau of the Budget put out this pamphlet in 1912. It was published by the Government Printing Office, and I secured a copy for my own personal use and had it bound. It is very possible that another copy may be secured from the Budget Bureau or the Government Printing Office, but the Code really has most of the existing statutes in it. Of course, it is not quite as convenient as this pamphlet. I use it every day on my desk.

Mr. CHANDLER. Are the legal requirements involved in Government contracts all passed upon before those contracts reach your office, or do you have to pass on all of them yourselves?

Mr. MCGUIRE. The administrative officers give more or less consideration to the matter, but from our appropriation standpoint_the General Accounting Office and the Congress have the last word to say in the matter; while from other standpoints the courts decide such questions as they arise from time to time in cases coming before them.

Mr. CHANDLER. When you check up on the Bacon-Davis Act contracts, how can you determine that the terms of that law are complied with?

Mr. MCGUIRE. The Bacon-Davis Act of March 3, 1931 (46 Stat. 1494), was amended by an act of August 30, 1935, Public No. 403. The amendment was substantially in accordance with our recommendation at the time that the original Bacon-Davis Act was in the Congress. The amended act provides for a predetermination of wages with respect to Government construction contracts involving the United States and the District of Columbia, where the amount is in excess of $2,000.

Of course, that law took effect on September 30, 1935, or thirty days after its approval, and in the statute the Congress has provided that the predetermined wages which must be paid to its contractor and all subcontractors shall be stated in the advertised specifications and made a part of the contract. When the department advertises its specifications for construction work under this statute, and I might say here that this statute applies to the construction work under the regular appropriations; the emergency appropriations have a different procedure-when they advertise the specifications for these contracts, all bidders know just what wages they must pay to the various classes of workmen. The contract contains an appropriate clause to carry out this statute, and when the contract has actually been awarded and signed, a copy of it is filed in our

office, and we have a force of clerks who examine these contracts as they reach the office, to see whether or not the various requirements of the Congress-not all as to wages but other matters-are contained in the contract, and if some contract does not conform to its various statutes, it is immediately brought to the attention of the Comptroller General and we take it up with the head of the Department, independent establishment, board, commission, or other agency responsible for the contract.

Mr. HEALEY. Who predetermines the wage scale?

Mr. MCGUIRE. This act of August 30, 1935, provides—

All contracts shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics, which shall be based upon the wages of labor determined by the Secretary of Labor, to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State

and so forth. The Secretary of Labor determines the rate of wages. The rates are stated in the advertised; specifications, and the contractor and his subcontractors must pay them, and if he fails so to do, there is a provision in the statutes and the contracts for construction work for adjustment of the matter.

Mr. RAMSEY. Do they have any difficulty in determining these wage scales?

Mr. MCGUIRE. This act went into effect 30 days after its passage. That would be September 30, 1935. So far no case has come to our attention under this contract.

Mr. RAMSAY. Do you have any difficulty with respect to this provision concerning the lowest responsible bidder?

Mr. MCGUIRE. Yes, sir; that question has been before us a number of times. Section 3709 of the Revised Statutes provides that no contract shall be let except after advertising. That provision, it might be of interest to note, originated about 1809 and in its present form was placed in the appropriation act of 1860 by Jefferson Davis, shortly after his return to the Senate from being Secretary of War.

That statute has been interpreted to mean that the contract must be advertised and let to the lowest responsible bidder. Of course, we have different classes of contracts. We have contracts for construction work-contacts for small construction jobs and contracts for great public buildings and monuments. We have contracts for supplies and machinery, ships, and things of that sort that must be specially constructed or manufactured, and then there are contracts for paper, pins, needles, and whatnot.

As to construction contracts and contracts requiring supplies to be specially manufactured, our decisions have held that the specifications may properly provide for a showing on the part of bidders as to their training, experience, and financial resources, to carry out the contract, but where the contract is for the purchase of pins and needles and matters that are obtainable in the open market, then the test of responsibility there is whether the contractor is able to furnish a performance bond.

Mr. HEALEY. Does that apply to clothing for the Army?

Mr. MCGUIRE. Manufactured clothing? I would not think it would, because you could not buy the Army clothing in the open market, and in my judgment, the specification may very properly pro

vide, in a case of that sort, for a showing of experience and so forth on the part of bidders. If a bidder for suit supplies to be specially manufactured cannot meet such reasonable requirements, his bid may be respected, even though it is low. If he should be awarded the contract on the basis of such showing and it should subsequently develop that he did not, in fact, comply with the terms of his contract, such contract may be canceled, the supplies purchased elsewhere, with the excess cost, if any, charged to the contractor and his surety.

Chairman SUMNERS. Mr. Chairman, may I ask a question?
Mr. HEALEY. Mr. Sumners.

Chairman SUMNERS. Some observations have been made with reference to what is known as the bid broker, who makes a bid and then parcels the contract out to other people. I do not see how such a man as that could ever get a contract.

Mr. MCGUIRE. Well, the Navy Department has a provision in its statutes that the contract shall be awarded to a manufacturer or a regular dealer. That would exclude the bid broker.

Mr. HEALEY. Is there any other department of the Government that has that?

Mr. MCGUIRE. They do not have that particular statute, but the Secretary of the Interior had some difficulty with respect to school books and supplies for the Indian Service, and he asked the question whether he could so specify in the specifications, and that question was answered in the affirmative. Other departments could, if they so desired, limit the awarding of contracts to the manufacturers or regular dealers in supplies.

Mr. RAMSAY. Did you not have some difficulty in connection with this provision in regard to some shoes bought by the Army?

Mr. MCGUIRE. I recall no instance of it. There may have been some difficulty, but it did not come to my attention.

Mr. HEALEY. How is it that this bid broker practice exists if, as you say, on Government contracts they are permitted to make a choice of the person who is qualified to fill the order after the bids are in?

Mr. MCGUIRE. I know of no specific case, but I think that if you will examine the specifications you will see that there was no such provision placed in the specifications.

Mr. HEALEY. Can you refer to any particular decision affecting that?

Mr. MCGUIRE. I can furnish you the exact citation.

Mr. HEALEY. We would like to have it.

Mr. MCGUIRE. The decision is in 10 Comp. Gen., 314, 316, with which you might compare 8 Comp. Gen., 252.

Chairman SUMNERS. What I am trying to get at is this: If you let the contract to the lowest responsible bidder, might it not be so that if the bidder would show that he does not himself manufacture the commodity, but that he has an enforceable contract with somebody who has ability, and good faith, someone that you would have confidence in, that you would then let a contract even though the broker were not himself a manufacturer?

I am just asking for information. I am not a member of this subcommittee, and am asking this question by permission of the chairman.

Mr. MCGUIRE. In the first instance, the Congress has specifically provided for many years that a contract against the United States. may not be assigned. Section 3737, Revised Statutes is specifically applicable thereto. Possibly they mean by "brokerage" that "A" would get a contract to furnish, say, paper to the Government Printing Office, but he is not a manufacturer of paper, and he farms out the contract to various subcontractors to get the paper from them, which he delivers.

Chairman SUMNERS. And in testing whether or not he is a good bidder, you would determine whether or not he has contracts with paper manufacturers who could perform that contract? If so, how would you go about it? Suppose that I am just such a person, and I make a bid to furnish paper. Would the fact that I am financially responsible be the sole test as to whether or not I am a good bidder or the best bidder?

Mr. MCGUIRE. Are you a regular dealer in the supplies?

Chairman SUMNERS. Hardly. I am just as far away from the business, for the purposes of this illustration, as I can be.

Mr. MCGUIRE. You would not qualify under such a provision, because you would not be a regular dealer in the type of supplies required to be delivered under the contract.

Mr. HEALEY. What is the date of the passage of that Navy act where they can stipulate that the goods must be manufactured at the place of business of the bidder?

Mr. MCGUIRE. It does not specify that.

Mr. HEALEY. But they can, as I understand it, eliminate the possibility of their contracts going to bid brokers by virtue of that

statute.

Chairman SUMNERS. I do not want to be in the attitude of intimating that a bid broker is a bad person. I just do not know anything about him. I do not know whether there is anything wrong about a bid broker or not.

Mr. MCGUIRE. It is section 3722 of the Revised Statutes which originates in the act of March 3, 1863, 12 Stat. 828.

Mr. CHANDLER. Is it a long section?

Mr. MCGUIRE. Not so very long.

Mr. CHANDLER. Read it into the record.

Mr. MCGUIRE. It reads [reading].

The chief of any bureau of the Navy Department, in contracting for naval supplies shall be at liberty to reject the offer of any person who, as principal or surety, has been a defaulter in any previous contract with the Navy Department. Parties who have made defaults as principals or sureties in any former contract shall not be received as sureties on other contracts, nor shall the copartners of any firm be received as sureties for such firm or for each other, nor in contracts with the same bureau shall one contractor be received as surety for another. Every contract shall require the delivery of a specified quantity, and no bids having nominal or fictitious prices shall be considered. If more than noe bid be offered by any one party by or in the name of his or their clerk, partner, or other person, all such bids may be rejected, and no person shall be received as a contractor who is not a manufacturer of or regular dealer in the articles which he offers to supply.

Mr. HEALEY. You have not the date of that?

Mr. MCGUIRE. It is section 3722 of the Revised Statutes.

Mr. HEALEY. We have been told here that the Navy Department, because of the practice of persons who do not maintain a regular