establishment, plant, or factory being awarded bids which they subsequently sublet, believed that, in view of that practice, it was necessary to ask Congress for the passage of that particular statute. Do you so understand that?

Mr. MCGUIRE. This was prior to 1874, and possibly the members. of this committee will remember that back there, in that time, we had quite a bit of trouble with the star route mail contracts that they were farming out, and that and similar statutes were passed with respect to them. The Post Office statutes with respect to this matter are the Act of May 4, 1882, 22 Stat., 53, 54, and Act of May 17, 1878, 20 Stat., 62.

Now, I do not know of my own knowledge just why this particular provision originated in the Navy law, but I do know that some abuses crept into the star route contracts for the carriage of the mail and that Congress corrected the matter.

Mr. HEALEY. And the Army has not any such statute?

Mr. MCGUIRE. No; but they may, if they so desire, under this decision, state in the specifications substantially the same as is here. Mr. HEALEY. Under existing law?

Mr. MCGUIRE. Yes.

Mr. HEALEY. The contract is required to be awarded to the lowest responsible bidder, but the Army may write those specifications in the notice to bidders?.

Mr. MCGUIRE. Yes, sir; and we so notified the Secretary of the Interior with respect to the purchases of their supplies for the Indian Service.

Mr. HEALEY. When was that?

Mr. MCGUIRE. Four or five years ago.

Mr. HEALEY. Can we get that and file it in the record?

Mr. MCGUIRE. Yes, sir. I will forward a copy of the decision. (The authorization above referred to is reproduced below :)

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, January 20, 1931,

The Honorable The SECRETARY OF THE INTERIOR,
SIR: There has been received your submission of December 20, 1930, to the
effect that since it was essential for supplies to be delivered to Indian schools,
agencies, and hospitals before the school year begins in September; that since
the imposition of liquidated damages on delinquent contractors is inadequate
to prevent delay necessarily incurred by a delinquent contractor and the neces-
sity for the purchase of the material in the open market; and that since a
number of organizations or individuals had been bidding and contracting for
delivery of Indian supplies on a speculative basis, it was desired to exclude
therefrom all but legitimate dealers therein.

The reasons for this procedure are stated in your letter as follows: "Paragraph 21 of the Standard Government Instructions to Bidders-Construction and Supplies (Standard Form No. 22). a copy of which is attached, requires bidders to state in their proposals whether they are manufacturers of or regular dealers in the articles. It also expresses a desire that bidders who are not manufacturers give the name of the manufacturer from whom the articles are to be obtained, including catalogue references. So far as we are aware the term 'regular dealer' has not been authoritatively interpreted in such a way as to fix the status of those bidders who are not manufacturers. However, bidding is limited to the two classes mentioned, namely, manufac turers and regular dealers. The Indian Service does not seem to have any specific trouble with the group classed as manufacturers, but it does have many unsatisfactory dealings with those who class themselves as regular dealers but who really are not. This latter group consists of individuals who have no regular place of business where the commodities bid on are brought and sold,

but have an office and more generally merely desk room in some other office where mail is received and sent out. These people have no difficulty in furnishing a bond and in that manner bringing themselves within the scope of our understanding of your interpretation of a responsible bidder. Their bids are prepared in the proper form and supported by the necessary guaranty, but It has come to they have practically no control over the commodity bid on. the attention of the Indian Service at different times that this class of bidders does not attempt to close the deal for the article until after the award is made to them by it. It has also been learned that some of these bidders have an opening of bids prior to the day and hour set by the Indian Service and make a selection of the offer they wish to use as a basis for the bid made to it. Too frequently, on articles of subsistence particularly, do they fail to deliver what is contracted for, causing delay and trouble for the Service, or they fail to make delivery on time with the same results to the Service. Formerly this class of bidders was debarred by the Indian Service, but as fast as it debarred them by one name they hid their identity as such and bid under some other name and through some other individual. It is understood that you have looked with disfavor upon the maintenance of a debarred bidders' list for the Indian Service, but will permit the debarment, for a limited period, of those whose performance is unsatisfactory, provided you are notified and the Indian Service has sufficient ground upon which to base the debarment. This Department does not consider the class of bidders referred to as being legitimate dealers or satisfactory bidders and contractors, and it desires to establish a definite basis for the rejection of their bids as far as the individuals or com panies concerned can be identified.

"The particular group in mind started with the Terminal Supply Company, directed and controlled, it is understood, by a man named Hoffman. It was discovered that out of the same office bids were issued under the name of the Arcadia Textile Co. for textiles, the Federal Supply Co. for food supplies, the Explosive Chemical Co. for chemicals and drugs, while the Terminal Supply Co. bid on other artic.es. The Navy Department, the War Department, and others experienced the same difficulty with them that the Indian Service did and debatred them before that Service had an opportunity to do so. At that time the Navy Department and the Indian Service were exchanging lists of debarred bidders and, based upon their debarment and the treatment received by those companies, they were debarred by the Indian Service. The next year a bid was received from the H-P Mercantile Co. and, through some difficulty in having a telegram and mail delivered to them from the Indian Service, it was found that the H-P-Mercantile Co. was none other than Harry Pincus, a brotherin-law of Hoffman, and that he was acting as an agent for the Terminal Supply Co. The Service next had trouble with the Ardley Food Supply Co. and found that organization connected with the Terminal Supply Co. Another bidder is the Raritan Grocery Co., which is connected with the same group. The H. D. Lehds Co., it is understood, is an offshoot thereof.

"In view of the trouble the Indian Service has experienced with this group and others of somewhat like character and in view of your decision that debarments may follow only after you are satisfied that the cause justifies the action, it is believed that some condition should be imposed in Indian Service advertisements, which will exclude that class of bidders. The Indian Service has plenty of legitimate bidders who want the business and take all reasonable precautions to see that the contracts entered into are carried out, which seemingly cannot be said of the other group. Competition is keen on the requirements of the Indian Service and these more or less unsatisfactory bidders and contractors are not essential to the economical purchasing of supplies for that Service. There is nothing to be gained and much to lose by dealing with a class of bidders that is now being criticized, for legitimate bidders argue that they cannot compete with that class and it is often found that the low bids offered by other than regular dealers and manufacturers represent in the deliveries something other than that for which the Indian Service has advertised and contracted for. This means the ultimate buying against the account of the delinquent contractor. The Indian Service proposes, with your consent, to debar that class of contractors in the future as the opportunity presents itself, but it should have the right to avoid that contingency by eliminating from consideration in awarding any contract the bids of those of that class when they become identified as such and have not as yet been debarred. It is, therefore, proposed to add, with your approval, the following clause to the Standard Indian Service Instructions:

"The term 'regular dealer' includes those individuals or firms who regularly carry a stock of the merchandise bid on and who have a warehouse or shop from which sales are made to the public, as well as to the Government. The term 'regular dealer' includes manufacturers' agents who are regularly employed on a salary or commission basis and who hold proper credentials from manufacturers of the goods bid on, which establish those facts.

"The term 'regular dealer' does not include individuals or firms who do not regularly carry a stock of the merchandise bid ou, nor have a warehouse or shop from which sales are made to the public as well as to the Government; nor does it include those who cannot qualify as bona fide manufacturers' agents under the foregoing rule.

"Bids from any individual or firm who does not meet the conditions herein imposed as to who is a 'regular dealer' will be rejected.”

There is no basis for the maintenance of a debarred bidders' list and, as you report, any attempt to maintain one is doomed in advance because the debarred bidder may, and frequently does, immediately organize a company or corporation under some other name which is not on the debarred bidders' list. While the United States may look through the corporate entities to the individuals behind them to determine a responsible bidder, such procedure appears not practical in contracting for supplies which may be procured in the open market. The proper procedure is to state in the advertised specifications the minimum requirements the prospective contractor must have and a requirement for a reasonable showing of facts to establish such qualifications, and then disregard the proposals of all those who do not possess such requirements. The United States is not required to temporize with such individuals or organizations as you have mentioned in your submission and incur expense and delay because they found it impossible or unprofitable to conform to the terms of their contracts.

There appears no legal objection to the definition of regular dealer which you propose for incorporation in the Standard Indian Service Instructions but there is suggested for inclusion the following paragraph between your proposed second and third paragraphs:

"If the bidder is not a manufacturer of the merchandise bid upon, he must submit with his bid facts showing that he is a regular dealer in the merchandise bid upon such as the name of the manufacturer or manufacturers or agency from whom he purchases and a statement of the period of time he has dealt with such manufacture and/or agency."

If the conclusion is reached after the bids are submitted that a low bid should be rejected because the low bidder was not the manufacturer or regular dealer in the supplies bid upon, a copy of the advertisement, specifications, and bids should be submitted to this office, until otherwise advised, so that there may be considered in advance of contracting the administrative statement of reasons why it may be believed that the low bid should be rejected. Extreme care must be exercised to see that in following this procedure there be no just cause for complaint.

Your question is answered accordingly.
Respectfully,

J. R. MCCARL, Comptroller General of the United States.

Mr. DUFFY of New York. Which member of the committee, do you think, can recall the passage of that act?

Mr. MCGUIRE. Mr. Sumners.

Chairman SUMNERS. I have delegated that particular duty to my friend to my right.

Mr. CHANDLER. He picks out the baby of the committee. [Laughter.] Chairman SUMNERS. Mr. McGuire, in practical operation, do you run into much difficulty or criticism-and you may not be able to answer this-or dissatisfaction on the part of people who work under the operation of the Bacon-Davis Act with reference to public buildings?

Mr. MCGUIRE. There was considerable criticism on the part of mechanics and laborers as to the original Bacon-Davis Act, because

that act provided that the contractor should pay to his employees the prevailing rate of wages, and, of course, there was always a dispute as to what was the prevailing rate of wages, and sometimes before they could get that matter determined, the work would be completed or the men had left the job and gone. Also, sometimes the contractors or subcontractors failed to pay the rates determined as the prevailing rate. But this act of August 30, 1935, wherein Congress amended the original Davis-Bacon Act, has been in operation, as I say, since September 30, 1935, 30 days after its passage, and I know of no instance where any dissatisfaction has arisen under that law. Bear in mind that that statute of 1935 applies only to construction contracts in excess of $2,000. That statute requires a predetermined rate of wages for the various classes of employment to be stated in the advertised specifications forming a part of the contract, and the payrolls are checked to see that the men are paid these wages by the contractor. If the contractor or subcontractor fails to pay the rate of wages stated in the contract the underpayment may be deducted from the moneys accruing to the contractor and paid by the Government to the employees.

So far as I know, that seems to be satisfactory to the contractors, and I have heard no complaint on the part of anyone concerned. Chairman SUMNERS. Is there any opportunity afforded for any sort of hearings in the determination of wages, and so forth?

Mr. MCGUIRE. As to that, Mr. Sumners, I could not say, because that is a matter that is handled in the Department of Labor.

Chairman SUMNERS. I ought to have known that when I asked the question.

Mr. RAMSAY. Under that provision that you have read, could the Army refuse to accept a bid where it appeared that the goods were to be manufactured by child labor, or prison labor?

Mr. MCGUIRE. Of course, they exclude now, or the contract standard forms contain a provision for the exclusion of convict-made goods. You understand that at the various Federal penitentiaries they manufacture certain supplies which the Government is required to purchase, but they are not required to purchase supplies manufactured in State or county prisons with convict labor that has been farmed out. The act of April 28, 1904 (33 Stat. 435), specifically prohibits the Postoffice Department from purchasing convict-made materials or supplies.

As to the child-labor provision, there has been no proposed stipulation suggested for a contract that has come to my attention that has been submitted to the Comptroller General, and that legal proposition has not been passed upon. Also, there is apparently no statutory provision for the inclusion of such a stipulation in Government contracts.

Mr. HANCOCK. We hear a good deal of talk about child labor around here. In how many States is child labor still permissible under the laws of those States?

Mr. MCGUIRE. Very few. I do not know just how many.
Mr. HANCOCK. I can only name one.

Mr. MCGUIRE. I have an impression that there are four or five. Mr. HEALEY. But do you know that the child labor laws are circumvented by home work, in which all members of the family, including the children, take part?

Mr. HANCOCK. You cannot do that very well on a construction job. Mr. HEALEY. But you can do it in the manufacture of clothing. Mr. MCGUIRE. Yes; you could.

Chairman SUMNERS. I do not think that that is a thing that Mr.. McGuire is qualified to speak on. I do not know how broad his qualifications are, but he is hardly before the committee in that capacity.

Mr. HEALEY. I think that the chairman is right about that.

But let me ask you this: Under existing law, is it possible for the Quartermaster General-and perhaps this is a repetition of a former question I asked to reject a bid which comes from a person who maintains no plant, no factory, but who merely maintains an office and who is acting in the capacity of a bid broker?

Mr. MCGUIRE. You know, Mr. Chairman, that the Congress and our office have been engaged for many years in trying to see that the needs of the Government are stated in the advertised specifications in such a way as to permit of full and free competition by all qualified bidders. Now, if the Quartermaster General was of the opinion that the public interest would be served by a requirement in the supply contracts with the War Department that the contract be limited to the manufacturer or a regular dealer in the supplies, he should so state in the specification, and then, with a requirement for a showing in that respect, that will permit of no juggling or appearance of favoritism in the awarding of contracts.

Mr. HEALEY. In the instance of one of these men who merely maintained an office, and who could be characterized as a bid broker, who submitted the lowest bid and was also able to put up a performance bond, would you say that the Quartermaster General may reject that bid because of the fact that he did not maintain a factory or a plant?

Mr. MCGUIRE. He would not have, of course, to maintain a factory or plant, because if we did that, you automatically would excluded from competition in Government contracts all retail dealers throughout the country, but the Department could require him to show that he either maintained a factory or plant or that he was a regular dealer in these supplies. In other words, they could so provide that a clothing merchant would not go out and bid for a coal contract merely for the purpose of getting it with the idea of making a profit somewhere along the line. They can provide that the man must be a regular coal dealer.

Mr. HANCOCK. Can they do that without any new legislation?

Mr. MCGUIRE. Yes. We so advised the Secretary of the Interior as to these Indian supplies 3 or 4 years ago.

Of course, you understand that we do not in our office draft the specifications. That is an administrative job. We advise as to any particular term that the administrative officers may wish to include in the specifications where Congress has not legislated as to specific requirements and generally they cannot include terms in specifications which will unduly deplete the appropriations.

Mr. HANCOCK. But they cannot include in those specifications any regulatory provisions concerning hours of work or wages?

Mr. MCGUIRE. As to hours of work, Congress itself has provided. that while 8 hours shall constitute a day's work on a construction