California attempted to enforce her minimum wholesale price
regulations with respect to milk sold to the United States at three
military installations in the State. Such milk was purchased for
strictly military consumption, for resale at federal commissaries,
for use at various military clubs, or for resale in various post
exchanges. The United States sued in a Federal District Court to
enjoin enforcement of the regulations on the grounds that (a) the
military installations were subject to the exclusive jurisdiction
of the United States, and (b) such regulations unconstitutionally
burdened the United States in the exercise of its constitutional
power to establish and maintain the Armed Forces and to acquire and
manage federal enclaves. A three-judge Court was convened, and it
enjoined California officials from enforcing the regulations as to
such milk. An appeal was taken directly to this Court.
Held:
1. The issue as to whether or not the state regulatory scheme
burdened the exercise by the United States of its constitutional
powers to maintain the Armed Services and to regulate federal
territory was a substantial federal question; the suit was one
"required" to be heard by a three-judge court; and the case was
properly brought to this Court by direct appeal under 28 U.S.C. §
1253. Pp.
371 U. S.
249-250.
2. The California price-fixing regulations cannot
constitutionally be applied to purchases of milk for strictly
military consumption or for resale at federal commissaries, since
the state regulations are in conflict with federal statutes and
regulations governing the procurement with appropriated funds of
goods for the Armed Services. Pp.
371 U. S.
250-263.
(a) The federal statutes and regulations require competitive
bidding or negotiations that reflect active competition; whereas
the state milk regulations would defeat this purpose by having a
state officer fix the price on the basis of factors not specified
in the federal law. Pp.
371 U. S.
250-255.
(b) A different conclusion is not required by 10 U.S.C. §
2306(f), as amended Sept. 10, 1962, which requires contractors
Page 371 U. S. 246
to submit cost or pricing data for any negotiated contract, but
makes that requirement inapplicable where "prices are set by law or
regulation." P.
371 U. S.
256.
(c) Nor is a different conclusion required by § 2304(g), also
added in 1962, which refers to negotiated procurements in excess of
$2,500 "in which rates or prices are not fixed by law or
regulation." Pp.
371 U. S.
256-261.
(d) The statutes and regulations governing procurements for the
Armed Services apply to purchases of milk for resale at federal
commissaries, as well as to purchases of milk for mess hall use.
Pp.
371 U. S.
261-263.
3. Insofar as the judgment below pertains to purchases of milk
with nonappropriated funds for use at various military clubs or for
resale at post exchanges, it is vacated, and the case is remanded
to the District Court for further proceedings. Pp.
371 U. S.
263-270.
(a) If the District Court finds that California's basic milk
price control law was in effect when the various tracts of land in
question were acquired, judgment as to this class of purchases and
sales should be for appellants. Pp.
371 U. S.
264-269.
(b) If the District Court finds that California's basic milk
price control law was not in effect when such tracts were acquired,
then it must make particularized findings as to where the purchases
and sale of milk with nonappropriated funds are made, and whether
or not such tracts are areas over which the United States has
"exclusive" jurisdiction, within the meaning of Art. I, § 8, cl.
17, of the Constitution. Pp.
371 U. S.
269-270.
190 F.
Supp. 645 affirmed in part and vacated and remanded in
part.
Page 371 U. S. 247
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
The main question in this case is whether California can enforce
her minimum wholesale price regulations as respects milk sold to
the United States at three military installations [
Footnote 1] (Travis Air Force Base, Castle
Air Force Base, and Oakland Army Terminal) located within
California and used for strictly military consumption, for resale
at federal commissaries, and for consumption or resale at various
military clubs and post exchanges. Milk used for the first two
categories of use is paid for with
Page 371 U. S. 248
appropriated funds, while that used in the clubs and exchanges
is purchased with nonappropriated funds. Prior to January, 1959,
the milk supplies purchased with appropriated funds and used at
those installations were obtained as a result of competitive
bidding and on terms below the minimum prices prescribed by the
Director of Agriculture of California. The Director advised
distributors that the State's minimum price regulations were
applicable to sales at Travis. Subsequently bids for milk supply
contracts at Travis were in strict compliance with California's
regulations, the added cost to the Federal Government being about
$15,000 a month. Later that year, California instituted a civil
action in the state courts against a cooperative that had supplied
milk at Travis below the state minimum price, seeking civil
penalties and an injunction. Thereafter, the United States brought
this suit in the District Court. The complaint alleged that state
price regulation of milk sales at Travis, a federal enclave, was
barred by the Constitution, since Travis is subject to the
exclusive jurisdiction of the United States. [
Footnote 2] It also alleged that such regulation
was an unconstitutional burden on the United States in the exercise
of its constitutional power to establish and maintain the Armed
Forces and to acquire and manage a federal enclave. The complaint
asked that a three-judge court be convened.
Meanwhile, the Director of Agriculture of California warned
distributors that the California regulation would be enforced at
Castle and at Oakland. Bids for milk thereafter received at Castle
were all at or above the state minimum price; and accordingly they
were rejected. A
Page 371 U. S. 249
new invitation for bids was issued, and one of those received
was below the state minimum. Thereupon, California sued the
successful bidder for an injunction, and later it sued other like
bidders. A similar experience was had at Oakland; bids at or above
the minimum were rejected, and a contract with a distributor for a
prior period was extended for three months with an estimated saving
to the United States of over $30,000. California again instituted
suit to enjoin the supplier from selling at below established
minimum wholesale prices. The United States amended its complaint
to include its purchases at Castle. As respects Oakland, the United
States commenced a separate action by a complaint substantially
identical with the other one, and they were later consolidated.
Appellants denied that these three installations were federal
enclaves giving the United States exclusive jurisdiction, and that
there was any conflict between the state regulatory scheme and the
federal procurement policy. Appellants also moved that the District
Court stay these actions pending determination of state law
questions by the state courts in the pending actions.
The three-judge District Court refused to stay the proceedings,
and granted the motion of the United States for summary judgment.
190 F.
Supp. 645. We postponed a determination of jurisdiction to the
merits.
Paul v. United States, 368 U.S. 965.
I
Here, as in
United States v. Georgia Public Service Comm'n,
post, p.
371 U. S. 285, the
suit was one "required" to be heard by a three-judge court within
the meaning of 28 U.S.C. § 1253, and therefore properly brought
here by direct appeal. Apart from the question whether the three
federal areas were subject to the exclusive jurisdiction of the
United States, the issue as to
Page 371 U. S. 250
whether or not the state regulatory scheme burdened the exercise
by the United States of its constitutional powers to maintain the
Armed Services and to regulate federal territory was a substantial
federal question, as
Penn Dairies, Inc. v. Milk Control
Comm'n, 318 U. S. 261;
Public Utilities Comm'n of California v. United States,
355 U. S. 534, and
United States v. Georgia Public Service Comm'n, supra,
make clear. A three-judge court was therefore required even if
other issues that might not pass muster on their own were also
tendered.
See 28 U.S.C. § 2281;
Florida Lime &
Avocado Growers, Inc. v. Jacobsen, 362 U. S.
73.
II
The California Act authorizes the Director of Agriculture to
prescribe minimum wholesale and retail prices [
Footnote 3]
"at which fluid milk or fluid cream shall be sold by
distributors to retail stores, restaurants, confectioneries and
other places for consumption on the premises. [
Footnote 4]"
The prohibitions run both against sales and against purchases,
[
Footnote 5] and both criminal
and civil penalties are provided. [
Footnote 6] The minimum wholesale prices, promulgated by
the Director of Agriculture, have been enforced with respect to
sales to the United States, as already noted.
In
Public Utilities Comm'n of California v. United States,
supra, we held that the federal procurement policy, which
required competitive bidding as the general rule and negotiated
purchase or contract as the exception, prevailed over California's
regulated rate system. That case, like
United States v. Georgia
Public Service Comm'n, supra, concerned transportation of
commodities. But the federal policy at the times relevant here was
the same for procurement of supplies and services. The statutes in
effect at the time of the
Public Utilities Commission of
California case are still the basic provisions governing
all
Page 371 U. S. 251
procurement by the Armed Services out of appropriated funds.
They require that contracts be placed by competitive bidding, the
award to be granted "to the responsible bidder whose bid . . . will
be the most advantageous to the United States, price and other
factors considered." [
Footnote
7] There are statutory exceptions, the relevant ones being as
follows:
"(a) Purchases of and contracts for property or services covered
by this chapter shall be made by formal advertising in all cases in
which the use of such method is feasible and practicable under the
existing conditions and circumstances. If use of such method is not
feasible and practicable, the head of an agency, subject to the
requirements for determinations and findings in section 2310, may
negotiate such a purchase or contract, if --"
"
* * * *"
"(8) the purchase or contract is for property for authorized
resale;"
"(9) the purchase or contract is for perishable or nonperishable
subsistence supplies;"
"(10) the purchase or contract is for property or services for
which it is impracticable to obtain competition;"
"
* * * *"
"(15) the purchase or contract is for property or services for
which he determines that the bid prices received after formal
advertising are unreasonable as to all or part of the requirements,
or were not independently reached in open competition, and for
which (A) he has notified each responsible bidder of intention to
negotiate and given him reasonable opportunity to negotiate; (B)
the negotiated price is
Page 371 U. S. 252
lower than the lowest rejected bid of any responsible bidder, as
determined by the head of the agency; and (C) the negotiated price
is the lowest negotiated price offered by any responsible supplier.
[
Footnote 8]"
The Armed Services Procurement Regulation speaks in unambiguous
terms of a policy "to use that method of procurement which will be
most advantageous to the Government -- price, quality, and other
factors considered." [
Footnote
9] The Regulation states,
"Such procurement shall be made on a competitive basis, whether
by formal advertising or by negotiation, to the maximum practicable
extent. . . . [
Footnote
10]"
Whatever method is used -- formal advertising or negotiation --
"competitive proposals" must be
"solicited from all such qualified sources of supplies or
services as are deemed necessary by the contracting officer to
assure such full and free competition as . . . to obtain for the
Government the most advantageous contract -- price, quality, and
other factors considered. [
Footnote 11]"
If advertising for bids is used, the contract is to be awarded
"to the lowest responsible bidder." [
Footnote 12] Moreover, even when advertising for bids is
not used, competitive standards are not relaxed. The policy is
"to procure supplies and services from responsible sources at
fair and reasonable prices calculated to result in the lowest
ultimate over-all cost to the Government. [
Footnote 13]"
"The fact that a procurement is to be negotiated does not relax
the requirements for competition." [
Footnote 14]
"Whenever supplies . . . are to be procured by negotiation,
price quotations . . . shall be solicited
Page 371 U. S. 253
from all such qualified sources of supplies or services as are
deemed necessary . . . to assure full and free competition . . . to
the end that the procurement will be made to the best advantage of
the Government, price and other factors considered. [
Footnote 15]"
The Regulation then specifies 20 separate considerations for the
selection of a supplier in case of a negotiated procurement.
[
Footnote 16] The first of
these is a "comparison of prices quoted." [
Footnote 17]
We have said enough to show that the Regulation does more than
authorize procurement officers to negotiate for lower rates. It
directs that negotiations or, wherever possible, advertising for
bids shall reflect active competition, so that the United States
may receive the most advantageous contract.
While the federal procurement policy demands competition, the
California policy, as respects milk, effectively eliminates
competition. The California policy defeats the command to federal
officers to procure supplies at the lowest cost to the United
States by having a state officer fix the price on the basis of
factors not specified in the federal law. Moreover, when the supply
contract is negotiated because "it is impracticable to obtain
competition," to use the statutory words, [
Footnote 18] it is the state agency, not the
federal procurement officer and the seller, that determines the
price provisions of the contract, if state policy prevails. The
collision between the federal policy of negotiated prices and the
state policy of regulated prices is as clear and acute here as was
the conflict between federal negotiated rates and state regulated
rates in
Public Utilities Comm'n of California v. United
States, supra. In that case, we said that the Regulation then
existing, which was promulgated under the same Act here
involved,
"sanction[ed]
Page 371 U. S. 254
the policy of negotiating rates for shipment of federal property
and entrust[ed] the procurement officers with the discretion to
determine when existing rates will be accepted and when negotiation
for lower rates will be undertaken."
355 U.S. at
355 U. S.
542-543.
Penn Dairies, Inc. v. Milk Control Comm'n, supra, is
not opposed. As we noted in
United States v. Georgia Public
Service Comm'n, supra, Congress, after the
Penn
Dairies decision and before
Public Utilities Comm'n of
California v. United States, revised and restated the federal
procurement policy. As stated in the House Report, [
Footnote 19]
". . . the bill represents a comprehensive revision and
restatement of the laws governing the procurement of supplies and
services by the War and Navy Departments. It holds to the
time-tested method of competitive bidding. At the same time, it
puts within the framework of one law almost a century's
accumulation of statutes, and incorporates new safeguards designed
to eliminate abuses, assures the Government of fair and reasonable
prices for the supplies and services procured, and affords an equal
opportunity to all suppliers to compete for and share in the
Government's business."
The Regulation controlling the
Penn Dairies decision
stated, as does the present Act, that supplies might be purchased
on the open market where it is "impracticable to secure
competition." 318 U.S. at
318 U. S. 277.
But, unlike the present Regulation, the earlier one declared that
such a situation arose "when the price is fixed by federal, state,
municipal or other competent legal authority."
Ibid. The
earlier Regulation further stated that federal procurement officers
should not require suppliers to comply with state price-fixing laws
before it was judicially determined whether the latter were
applicable to government contracts (
id. at
318 U. S.
276), a provision which
Page 371 U. S. 255
the Court said manifested a federal "hands off" policy
respecting minimum price laws of the States.
Id. at
318 U. S.
278.
The present Regulation makes no such allowances, contains no
such qualifications, and provides for no such exception. Its
unqualified commands is that purchases for the Armed Services be
made on a competitive basis; and it has, of course, the force of
law.
Public Utilities Comm'n of California v. United States,
supra, at
355 U. S.
542-543. California's price-fixing policy for milk is as
opposed to this federal procurement policy as was California's
ratemaking policy in
Public Utilities Comm'n of California v.
United States, supra.
Policy-wise, it might be better if state price-fixing systems
were honored by federal procurement officials. It is urged that, if
that were done, substandard producers of some suppliers would lose
the advantage they may enjoy in competitive bidding. Congress
could, of course, write that requirement into the law. Congress has
written into the Act certain provisions of that character. It has
required that contractors or manufacturers pay not less than the
minimum wage as determined by the Secretary of Labor to be the
prevailing wage; that building contractors pay such minimum wages
to laborers and mechanics; and that no laborer or mechanic doing
any work for contractors and subcontractors on government contracts
shall be required or permitted to work more than eight hours a day,
unless one and a half times the basic rate is paid for overtime.
[
Footnote 20] The inclusion
of these provisions, aimed as they are at substandard working
conditions, shows that Congress has been alert to the problem.
Their inclusion makes more eloquent the omission of any like
requirement as respects prices or rates fixed by state law.
Page 371 U. S. 256
It is argued that the Act of September 10, 1962, 76 Stat. 528,
changed the situation. California points to § 2306(f), which
requires contractors to submit cost or pricing data for any
negotiated contract, but goes on to lift that requirement where
"prices [are] set by law or regulation." But this provision does
not say, even equivocally, that federal procurement officers must
abandon competitive bidding where prices are "set by law or
regulation." The Regulation makes competitive bidding the rule, as
we have seen. Section 2306(f) only provides for waiver of "cost or
pricing data" under certain kinds of negotiated contracts if the
prices of some commodities included in the contract have been "set
by law or regulation." That is to say, as, if, and when the
procurement officer is authorized to accept prices "set by law or
regulation," he need not follow the requirements of § 2306(f)
concerning "cost or pricing data."
California cites, but builds no argument around, § 2304(g), also
added in 1962. It is now suggested for the first time that §
2304(g) requires federal procurement to follow state rate-fixing
and state price-fixing. It provides in relevant part:
"In all negotiated procurements in excess of $2,500 in which
rates or prices are not fixed by law or regulation and in which
time of delivery will permit, proposals shall be solicited from the
maximum number of qualified sources consistent with the nature and
requirements of the supplies or services to be procured, and
written or oral discussions shall be conducted with all responsible
offerors who submit proposals within a competitive range, price,
and other factors considered. . . ."
Here again, the new statutory provision does not purport to say
when rates or prices "fixed by law or regulation" govern federal
procurement. At the time § 2304(g) was added to the Act, the
Regulation which we have discussed
Page 371 U. S. 257
at length was in full force. That Regulation, unlike the one in
Penn Dairies, eliminated the earlier provisions which had
been construed to manifest a federal "hands off" policy respecting
minimum price laws of the States. 318 U.S. at
318 U. S. 278.
The Regulation in force when this litigation started and in force
when the 1962 Act was passed provides unequivocally for competitive
bidding "to the maximum practicable extent," as we have noted. That
might well permit procurement officers under some circumstances to
purchase at state-fixed prices. But competitive bidding is the
rule, not the exception. There is not a word in the legislative
history of the 1962 Act [
Footnote 21]
Page 371 U. S. 258
which indicates a congressional policy to uproot the Regulation
or to change it. It was, indeed, repeatedly approved.
See
S. Rep.No.1884, 87th Cong., 2d Sess.; H.R.Rep.No.1638, 87th Cong.,
2d Sess., Parts I and II; Cong.Rec.,
Page 371 U. S. 259
June 7, 1962, p. 9231
et seq. Four years before the
1962 Act was passed,
California Comm'n had held that state
regulations cannot preclude the Federal Government from negotiating
lower rates. This result was not once questioned in the legislative
history of the 1962 Act, even though the instant case was being
litigated during this entire period. That Act only reflects an
effort to provide collateral accommodations as, if, and when
federal procurement follows state price-fixing. The mandate of 10
U.S.C. § 2305(a) is still unequivocal, and the statutory exceptions
to competitive bidding contained in § 2304(a), discussed above,
remain unchanged.
The 1962 Act fails to show a congressional purpose to abandon
competitive bidding. On the contrary, the purpose,
Page 371 U. S. 260
as stated in S.Rep.No.1884, 87th Cong., 2d Sess., was to
increase the efficacy of the competitive bidding system then in
force.
Not only was the existing Regulation cited repeatedly with
approval, but the aim of the Act was described in unambiguous
terms:
"In general, the objectives of the changes are --"
"(1) To encourage more effort to accomplish procurements by
formal advertising;"
"(2) To require a clearer justification before certain
authorities to negotiate contracts are used;"
"(3) To obtain more competition in negotiated procurement;"
"(4) To provide safeguards for the Government against inflated
cost estimates in negotiated contracts."
Id., p. 1. The House received an equally unambiguous
explanation from the floor manager of the bill:
"[T]his bill . . . has for its chief purpose, an increase in
competitive purchasing. . . . [O]nly 13 percent of purchasing is
now done by sealed competitive bidding. That is clearly not enough.
Competition must be increased; competition must be had even in
negotiated purchasing; and all negotiated purchasing must be
further reduced."
Cong.Rec., June 7, 1962, p. 9234.
If there had been a desire to make federal procurement policy
bow to state price-fixing in face of the contrary policy expressed
in the Regulation, we can only believe that the objectives of the
Act would have been differently stated. In sum, the references to
rates or prices "fixed by law or regulation" are merely minor
collateral accommodations to those situations where, within the
limits of the Regulation and the 1962 Act, the federal
procurement
Page 371 U. S. 261
official decides that the practical way to obtain the supplies
or services is by following the state price-fixing or rate-fixing
system.
California, however, says that, whatever may be the federal
policy as to purchases of milk for mess hall use, purchases of milk
for resale at federal commissaries stand on a different footing.
These commissaries are "arms of the Government deemed by it
essential for the performance of governmental functions," and
"partake of whatever immunities" the Armed Services "may have under
the constitution and federal statutes."
Cf. Standard Oil Co. v.
Johnson, 316 U. S. 481,
316 U. S. 485.
Purchases for resale at these federal commissaries are made from
appropriated funds, and the procurement officers act under the same
Regulation when they purchase milk for the commissaries as they do
when they purchase it for mess hall use. California points out,
however, that the federal statute provides that, where commodities
are purchased for resale, they may be procured by negotiation,
rather than by formal advertising [
Footnote 22] -- a provision we have quoted above and
which was written into the law because purchases for commissaries
"are generally not made by specifications but by brand names."
[
Footnote 23] Milk, however,
does not fit the category of commodities for which that exception
was designed. Moreover, the statutory exception to formal
advertising is merely permissive; the procurement officer "may"
negotiate for articles to be resold, but he is not required so to
do. He is free to purchase by formal advertising from the
responsible bidder whose bid "will be the most advantageous to the
United States." [
Footnote
24] Whether he negotiates milk contracts or uses competitive
bidding is made dependent by the federal statute on his
informed
Page 371 U. S. 262
discretion, not on state price-fixing policies. Moreover, as,
if, and when he negotiates, the Regulation, as already noted,
requires price quotations
"from all such qualified sources of supplies or services as are
deemed necessary by the contracting officer to assure full and free
competition . . . to the end that the procurement will be made to
the best advantage of the Government, price and other factors
considered. [
Footnote
25]"
And, to repeat, the procurement officer when he negotiates is
controlled by 20 separate factors, one of which is "comparison of
prices quoted," [
Footnote
26] and none of which relates in any manner whatsoever to the
price-fixing policies of a State.
The fact that the cost of products sold at commissaries benefits
commissary purchasers does not make the commissary any the less a
federal agency.
Cf. Standard Oil Co. of California v. Johnson,
supra. Congress authorizes the payment for commissary supplies
from appropriated funds. [
Footnote 27] The federal statutes dealing with
procurement policies expressly make them applicable to all
purchases "for which payment is to be made from appropriated
funds." [
Footnote 28]
Congress, to be sure, has provided that commissaries may not use
any appropriated funds
"unless the Secretary of Defense has certified that items
normally procured from commissary stores are not otherwise
available at a reasonable distance and a reasonable price in
satisfactory quality and quantity to the military and civilian
employees of the Department of Defense. [
Footnote 29]"
Here again, however, the question of what is a "reasonable
price" is left to the discretion of a federal officer. Congress has
not
Page 371 U. S. 263
directed that commissaries be removed from the purview of
federal procurement policies; nor has it adopted state price-fixing
policies as federal policies when it comes to purchases for
commissaries or otherwise.
III
What we have said would dispose of the entire case but for the
fact that some of the milk was purchased out of nonappropriated
funds for use in military clubs and for resale at post exchanges.
This brings us to the question whether Congress has power to
exercise "exclusive legislation" over these enclaves within the
meaning of Art. I, § 8, cl. 17, of the Constitution, which reads in
relevant part: "The Congress shall have Power . . . To exercise
exclusive Legislation in all Cases whatsoever" over the District of
Columbia and
"to exercise like Authority over all Places purchased by the
Consent of the Legislature of the State in which the Same shall be,
for the Erection of Forts, Magazines, Arsenals, dock-Yards, and
other needful Buildings."
The power of Congress over federal enclaves that come within the
scope of Art. I, § 8, cl. 17, is obviously the same as the power of
Congress over the District of Columbia. The cases make clear that
the grant of "exclusive" legislative power to Congress over
enclaves that meet the requirements of Art. I, § 8, cl. 17, by its
own weight, bars state regulation without specific congressional
action. The question was squarely presented in
Pacific Coast
Dairy v. Department of Agriculture, 318 U.
S. 285, which involved, as does the present litigation,
California's Act and an attempt to fix the prices at which milk
could be sold at Moffett Field. We held that "sales consummated
within the enclave cannot be regulated" by California because of
the constitutional grant of "exclusive legislation" respecting
lands purchased by the United
Page 371 U. S. 264
States with the consent of the State (
id. at
318 U. S.
294), even though there was no conflicting federal
Regulation.
Thus, the first question here is whether the three enclaves in
question were "purchased by the Consent of the Legislature" of
California within the meaning of Art. I, § 8, cl. 17.
The power of the Federal Government to acquire land within a
State by purchase or by condemnation without the consent of the
State is well established.
Kohl v. United States,
91 U. S. 367,
91 U. S. 371.
But, without the State's "consent," the United States does not
obtain the benefits of Art. I, § 8, cl. 17, its possession being
simply that of an ordinary proprietor.
James v. Dravo
Contracting Co., 302 U. S. 134,
302 U. S.
141-142. In that event, however, it was held in
Fort
Leavenworth R. Co. v. Lowe, 114 U. S. 525,
114 U. S.
541-542, that a State could complete the "exclusive"
jurisdiction of the Federal Government over such an enclave by "a
cession of legislative authority and political jurisdiction."
Thus, if the United States acquires with the "consent" of the
state legislature land within the borders of that State by purchase
or condemnation for any of the purposes mentioned in Art. I, § 8,
cl. 17, or if the land is acquired without such consent and later
the State gives its "consent," the jurisdiction of the Federal
Government becomes "exclusive." Since 1940, Congress has required
the United States to assent to the transfer of jurisdiction over
the property, however it may be acquired. [
Footnote 30] In either event -- whether the land
is acquired
Page 371 U. S. 265
by purchase or condemnation, on the one hand, or by cession, on
the other -- a State may condition its "consent" upon its retention
of jurisdiction over the lands consistent with the federal use.
James v. Dravo Contracting Co., supra, 302 U. S.
146-149. Moreover, as stated in
James Stewart &
Co. v. Sadrakula, 309 U. S. 94,
309 U. S.
99-100:
"The Constitution does not command that every vestige of the
laws of the former sovereignty must vanish. On the contrary, its
language has long been interpreted so as to permit the continuance
until abrogated of those rules existing at the time of the
surrender of sovereignty which govern the rights of the occupants
of the territory transferred. This assures that no area, however
small, will be left without a developed legal system for private
rights."
California has had several statutory provisions relevant to our
problem under Art. I, § 8, cl. 17. One pertained to acquisition of
land by the United States through "purchase or condemnation."
[
Footnote 31] Another
concerned land
Page 371 U. S. 266
"ceded or granted" by California to the United States. [
Footnote 32]
Those provisions were codified in 1943, acquisitions by
"purchase or condemnation" appearing in one section, [
Footnote 33] and acquisitions by
cession in another. [
Footnote
34] Another section of the codification, after stating that
California "cedes" to the United States "exclusive jurisdiction"
over all lands "held, occupied, or reserved" by the United States
"for military purposes or defense," provides that a description of
the land by metes and bounds and a map or plat of the land "shall
first be filed in the proper office of record in the county in
which the lands are situated." [
Footnote 35]
Most of the transactions creating these three federal enclaves
took place between 1942 and 1944, some in 1946 [
Footnote 36] and some even later.
Page 371 U. S. 267
Whether the United States has acquired exclusive jurisdiction
over a federal enclave is a federal question. As stated in
Silas Mason Co. v. Tax Commission, 302 U.
S. 186, 197:
"The question of exclusive territorial jurisdiction is distinct.
That question assumes the absence of any interference with the
exercise of the functions of the Federal Government, and is whether
the United States has acquired exclusive legislative authority so
as to debar the State from exercising any legislative authority,
including its taxing and police power, in relation to the property
and activities of individuals and corporations within the
territory. The acquisition of title by the United States is not
sufficient to effect that exclusion. It must appear that the State,
by consent or cession, has transferred to the United States that
residuum of jurisdiction which otherwise it would be free to
exercise. . . . In this instance, the Supreme Court of Washington
has held that the State has not yielded exclusive legislative
authority to the Federal Government. . . . That question, however,
involving the extent of the jurisdiction of the United States, is
necessarily a federal question."
As already noted, a California statute "cedes to the United
States exclusive jurisdiction" over described lands provided a
description of the metes and bounds and a map of the land first be
filed. [
Footnote 37]
California earnestly argues
Page 371 U. S. 268
that "cedes" in that context includes "purchases" and
"acquisitions by condemnation." But the California statutes have
consistently drawn the line between acquisitions by cession, on the
one hand, and all other acquisitions, on the other. That is the
gist of a recent opinion of the Attorney General of California in
which he treats an acquisition by cession as an alternative to
acquisition in other ways and rules that, when the acquisition is
by means other than cession, no map of the land need first be
filed. [
Footnote 38] That
seems to us to be the fair meaning of the statutory provisions.
The conditions expressed in the California Acts, [
Footnote 39] by which California consented
to "the purchase or condemnation" of land by the United States for
the prescribed purposes do not undertake to make applicable to the
federal enclaves all future laws of California. Since a State may
not legislate with respect to a federal enclave unless it reserved
the right to do so when it gave its consent to the purchase by the
United States, only state law existing at the time of the
acquisition remains enforceable, not subsequent laws.
See James
Stewart & Co. v. Sadrakula, supra; Arlington Hotel Co. v.
Fant, 278 U. S. 439. If
the price control laws California is now seeking to apply to sales
on federal enclaves were not in effect when the United States
acquired these lands, [
Footnote
40] the case is on all fours with
Pacific Coast Dairy v.
Department of Agriculture, supra. There, the Court held that
the California statutes under which some of the present
acquisitions were made granted the United States exclusive
jurisdiction over the tracts in question in spite of the express
conditions therein contained (
id. at
318 U. S.
293), and that this price control law was
Page 371 U. S. 269
not enforceable on a federal enclave in California because it
was adopted "long after the transfer of sovereignty." 318 U.S. at
318 U. S. 294.
The United States seeks shelter under that rule, saying California
is trying to enforce its current regulatory scheme, not the price
regulations in effect when the purchases were made. Yet, if there
were price control of milk at the time of the acquisition and the
same basic scheme has been in effect since that time, we fail to
see why the current one, albeit in the form of different
regulations, would not reach those purchases and sales of milk on
the federal enclave made from nonappropriated funds. Congress could
provide otherwise, and has done so as respects purchases and sales
of milk from appropriated funds. But, since there is no conflicting
federal policy concerning purchases and sales from nonappropriated
funds, we conclude that the current price controls over milk are
applicable to these sales, provided the basic state law authorizing
such control has been in effect since the times of these various
acquisitions. A remand will be necessary to resolve that question,
as the present record does not show the precise evolution of the
present regulatory scheme.
There also remains another uncertainty concerning the purchases
and sales of milk out of nonappropriated funds. There is a dispute
over where some of these sales are made. Each of the three enclaves
has numerous units acquired at various times, some of which may be
subject to "exclusive" federal jurisdiction and some of which may
not be. California earnestly claims that some sales out of
nonappropriated funds were made on units of land over which the
United States does not have "exclusive" jurisdiction. She makes the
claim as respects some milk used at Travis, some at Castle, and
some at Oakland.
We do not resolve the question, but vacate the judgment of the
District Court insofar as it relates to purchases and sales of milk
made from nonappropriated funds, and
Page 371 U. S. 270
remand the case to the District Court to determine whether, at
the respective times when the various tracts in question were
acquired, California's basic price control law as respects milk was
in effect. If so, judgment on this class of purchases and sales
should be for appellants. If not, then the District Court must make
particularized findings as to where the purchases and sales of milk
from nonappropriated funds are made and whether or not those tracts
are areas over which the United States has "exclusive" jurisdiction
within the meaning of Art. I, § 8, cl. 17 of the Constitution.
Moreover, the decree must be modified to reflect the change in
federal procurement policy as respects producers, already noted.
[
Footnote 41]
Accordingly the judgment is affirmed in part and in part vacated
and remanded.
It is so ordered.
[
Footnote 1]
The United States has abandoned a further claim that California
cannot constitutionally enforce her price regulations against
producers with respect to milk sold to distributors for processing
and ultimately resold to the United States. The abandonment of this
claim is not a confession of error, but only a decision not to
assert immunity from that price control as a matter of procurement
policy.
It appears that, while California has authorized her Director of
Agriculture to establish minimum wholesale prices for both "fluid
milk" and "fluid cream," and that, while the Director has done so
for a marketing area encompassing another base, all of the minimum
wholesale price regulations appearing in the record pertain only to
"fluid milk."
In view of these facts, the case now involves only California's
power to enforce her minimum wholesale prices for "fluid milk" with
respect to sales to the United States at the three bases
involved.
[
Footnote 2]
Article I, § 8, cl. 17, of the Constitution gives Congress
power
"To exercise exclusive Legislation . . . over all Places
purchased by the Consent of the Legislature of the State in which
the Same shall be, for the Erection of Forts, Magazines, Arsenals,
dock-Yards, and other needful Buildings."
[
Footnote 3]
Calif.Agr.Code, § 4350.
[
Footnote 4]
Id., § 4352.
[
Footnote 5]
Id., § 4361.
[
Footnote 6]
Id., § 4410.
[
Footnote 7]
10 U.S.C. § 2305(c). This statute is a recodification without
substantial change of the Armed Services Procurement Act of 1947.
See S.Rep. No. 2484, 84th Cong., 2d Sess. 19, 20-21.
[
Footnote 8]
Id., § 2304(a)(8)(9)(10)(15).
[
Footnote 9]
Armed Services Procurement Regulation (revised to April 20,
1959), � 1-301.
[
Footnote 10]
Ibid.
[
Footnote 11]
Id., � 1-302.2.
[
Footnote 12]
Id., � 1-301.
[
Footnote 13]
Id., � 3-801.1.
[
Footnote 14]
Id., � 3-101(a) (Army Procurement Procedure).
[
Footnote 15]
Id., � 3-101.
[
Footnote 16]
Ibid.
[
Footnote 17]
Ibid.
[
Footnote 18]
10 U.S.C. § 2304(a)(10).
[
Footnote 19]
H.R.Rep.No.109, 80th Cong., 1st Sess. p. 6.
[
Footnote 20]
Section 2304(f), which incorporates the Walsh-Healey Act (41
U.S.C. § 35-45), the Davis-Bacon Act (40 U.S.C. § 276a), and the
Eight Hour Law (40 U.S.C. §§ 324, 325a).
[
Footnote 21]
The ill which § 2304(g) was designed to cure was a
service-employed negotiating process which did not always produce
low enough prices. Informal quotations, usually accompanied by a
breakdown of cost elements, were first secured from as many sources
as practicable. Separate negotiations with only a few low bidders
were then undertaken in order to reduce the price by eliminating
unnecessary or unjustified charges. Congress and the Comptroller
General condemned this kind of "negotiation" because:
"It is our opinion that the authority to negotiate does not, of
itself, warrant the curtailment of competition. Yet this may be the
result where several proposals are received and the contracting
officer decides to negotiate with only one offeror or to award a
contract without discussion with any offeror. . . . We believe that
. . . negotiations [should be conducted] with all responsible
offerors who submit proposals within a competitive range, price and
other factors considered."
H.R.Rep.No.1959, 86th Cong., 2d Sess. 17.
See also
S.Rep.No.1900, 86th Cong., 2d Sess. 27; S.Rep.No.1884, 87th Cong.,
2d Sess. 8-9, 21-22; H.R.Rep.No.1638, 87th Cong., 2d Sess. 4-5.
The exact meaning of the "rates or prices . . . fixed by law or
regulation" exception to this "discussion" requirement is not too
clear. The one short reference to § 2304(g) in the congressional
debates implies that a procurement officer could accept any price
set "by law or regulation" without attempting to get a better price
from the offeror:
"Section (e) of the bill (§ 2304(g)) defines what actions shall
constitute a negotiation. It requires that there be discussions
between bidder and Government excepting in those limited instances
where it would be futile to have discussions; for example, prices
fixed by ratemaking authority or where there is an established
market, as in foodstuffs."
Cong.Rec., June 7, 1962, p. 9234. But, in view of the history of
the "impracticable to obtain competition" exception in §
2304(a)(10), with which this exception to the discussion
requirement is linked (
see S.Rep.No.1900, 86th Cong., 2d
Sess. 12), and the holding in
California Comm'n, 355 U.S.
at
355 U. S.
542-543, it is impossible to read this exception either
as requiring procurement by negotiation, rather than by competitive
bidding, or as absolutely prohibiting negotiation when prices are
fixed by state law.
Section 2304(a)(10), came to the 1947 Act from earlier Army
procurement statutes.
See H.R.Rep.No.109, 80th Cong., 1st
Sess. 8. It was
"intended to place the maximum responsibility for decisions as
to when it is impracticable to secure competition in the hands of
the agency concerned."
S.Rep.No.571, 80th Cong., 1st Sess. 8. The House floor manager
explained:
"This subsection will permit the services to negotiate contracts
in situations where there is an absence of competitive conditions.
The most typical situation involves an article which can be
obtained from only one supplier.
But the authority will be
available even where there are multiple sources if real competition
is nonetheless lacking."
(Emphasis added.) 93 Cong.Rec. 2319. Negotiation was authorized
in exceptional situations, such as § 2304(a)(10), to "promote the
best interests of the Government."
Ibid. See id.
at 2316.
In order to allay fears by some that "negotiation"
"means . . . the selection by more or less arbitrary methods of
a supplier and the payment to him of a price which he has been able
to set without fear of competition . . . ,"
the floor manager explained that:
"Experience has shown that, by careful negotiation and by
drafting a suitable contract, it is frequently possible to secure
substantial savings for the Government. In fact, negotiation,
properly employed, often promotes and intensifies competition."
Id. at 2320.
It is now suggested that certain statements by witnesses at
Committee Hearings show that, by enacting § 2304(a)(10), Congress
indicated that it did not intend to allow the services to seek
prices lower than those established by state regulatory agencies.
Clearly those statements reinforce the congressional purpose to
allow "negotiation" "where prices are set by law or regulation."
S.Rep.No.571, 80th Cong., 1st Sess. 8.
See Hearings on
H.R. 1366 before the Senate Committee on Armed Services, 80th
Cong., 1st Sess. 15 (July 1, 1947); Hearings on H.R. 1366 and H.R.
3394 before the Senate Committee on Armed Services, 80th Cong., 1st
Sess. 29; Hearings on H.R. 1366 before Subcommittee No. 6 of the
House Committee on Armed Services, 80th Cong., 1st Sess., No. 51 at
521. But they in no way suggest that negotiations must be had
unless they will "promote the best interests of the Government" (93
Cong.Rec. 2319), and they do not imply that the regulated price
must be accepted.
From the Committee reports and congressional debates previously
cited, it seems that a recent Senate report, issued after
California Comm'n was decided, correctly interprets the
purpose of § 2304(a)(10):
"An examination of the 15 illustrative circumstances in which
Exception 10 may be used readily reveals that some of these
circumstances necessarily involve only one source of supply. Others
offer the opportunity for competition."
S.Rep.No.1900, 86th Cong., 2d Sess. 12. One of the illustrations
was "Stevedoring, terminal services, when rates are prescribed by
law."
Ibid.
[
Footnote 22]
10 U.S.C. § 2304(a)(8).
[
Footnote 23]
S.Rep.No.571, 80th Cong., 1st Sess. 7.
[
Footnote 24]
10 U.S.C. § 2305(c).
[
Footnote 25]
Armed Services Procurement Regulation (revised to April 20,
1959), � 3-101.
[
Footnote 26]
Ibid.
[
Footnote 27]
See, e. g., 75 Stat. 377.
[
Footnote 28]
10 U.S.C. § 2303.
[
Footnote 29]
75 Stat. 377-378.
[
Footnote 30]
40 U.S.C. § 255 provides in part:
"Notwithstanding any other provision of law, the obtaining of
exclusive jurisdiction in the United States over lands or interests
therein which have been or shall hereafter be acquired by it shall
not be required; but the head or other authorized officer of any
department or independent establishment or agency of the Government
may, in such cases and at such times as he may deem desirable,
accept or secure from the State in which any lands or interests
therein under his immediate jurisdiction, custody, or control are
situated, consent to or cession of such jurisdiction, exclusive or
partial, not theretofore obtained, over any such lands or interests
as he may deem desirable and indicate acceptance of such
jurisdiction on behalf of the United States by filing a notice of
such acceptance with the Governor of such State or in such other
manner as may be prescribed by the laws of the State where such
lands are situated. Unless and until the United States has accepted
jurisdiction over lands hereafter to be acquired as aforesaid, it
shall be conclusively presumed that no such jurisdiction has been
accepted."
[
Footnote 31]
Cal.Stat.1939, c. 710, § 34, provides:
"The Legislature consents to the purchase or condemnation by the
United States of any tract of land within this State for the
purpose of erecting forts, magazines, arsenals, dockyards, and
other needful buildings, upon the express condition that all civil
process issued from the courts of this State, and such criminal
process as may issue under the authority of this State, against any
person charged with crime, may be served and executed thereon in
the same mode and manner and by the same officers as if the
purchase or condemnation had not been made, and upon the further
express condition that the State reserves its entire power of
taxation with respect to such tracts of land, and may levy and
collect all taxes now or hereafter imposed in the same manner and
to the same extent as if this consent had not been granted."
[
Footnote 32]
Ibid.:
"The authority to serve civil and criminal process and power to
tax hereinabove reserved to the State in the case of the purchase
or condemnation by the United States of any tract of land within
this State shall, any law to the contrary notwithstanding, also be
reserved to the State with respect to any tract of land over which
any jurisdiction is ceded or granted by the State to the United
States under any law of this State now in effect or which may
hereafter be adopted, the authority and power herein reserved by
the State to be exercised in the same manner and to the same extent
as if such jurisdiction had not been ceded or granted by the State
to the United States."
[
Footnote 33]
Calif.Gov.Code, § 111.
[
Footnote 34]
Id., § 113.
[
Footnote 35]
Id., § 114.
[
Footnote 36]
In the case of Oakland, the United States having first accepted
jurisdiction in 1943, accepted again in 1949 after enactment in
1946 (Calif.Gov.Code, § 126) of a new and expanded statutory
provision whereby California gave its consent "to the acquisition"
by the United States of land in that State. This provision required
that findings be made by the State Lands Commission, after
hearings, that the statutory conditions had been met. The
Commission made the findings describing by metes and bounds three
parcels of land at Oakland as respects which California consented
to the "exclusive" jurisdiction of the United States.
[
Footnote 37]
Note 35
supra.
[
Footnote 38]
23 Op.Atty.Gen.Calif. 14.
[
Footnote 39]
Note 31
supra.
[
Footnote 40]
We do not reach the question that would be presented where a
state law in effect at that time was later repealed and
subsequently reenacted.
[
Footnote 41]
See note 1
supra.
MR. JUSTICE STEWART, whom MR. JUSTICE HARLAN and MR. JUSTICE
GOLDBERG join, dissenting in part.
I
I do not doubt that Congress, in the exercise of its war power,
[
Footnote 2/1] could, by virtue of
the Supremacy Clause, [
Footnote
2/2] provide that an otherwise valid state law affecting the
price of milk shall not apply to milk purchased with federal funds
for use at these military installations. But I cannot agree that
Congress has done so. I am unable to find, either in the terms of
the relevant legislation or in its history, any evidence of a
congressional purpose to immunize these federal purchases from the
generally applicable California minimum price regulations. The
Page 371 U. S. 271
California statutes regulating its milk industry are admittedly
a valid exercise of that State's power to legislate for the general
health and welfare of its people, and serve the important function
of insuring stability in the production and supply of a vital
commodity. In
Penn Dairies v. Milk Control Comm'n,
318 U. S. 261, the
Court emphasized that
"[a]n unexpressed purpose of Congress to set aside statutes of
the states regulating their internal affairs is not lightly to be
inferred, and ought not to be implied where the legislative
command, read in the light of its history, remains ambiguous."
318 U.S. at
318 U. S. 275.
I think that the congressional purpose in the present case is less
than ambiguous -- that Congress has in fact manifested a
presumption and a desire that valid state welfare legislation such
as this is not to be undermined by the procurement activities of
the Federal Government. [
Footnote
2/3]
In the
Penn Dairies case, the Court held that the State
of Pennsylvania could enforce its milk marketing statute against
suppliers dealing with the federal military establishment. It was
held that the federal procurement legislation then in effect
contained no evidence of a policy to override state regulatory
legislation of this type. 318 U.S. at
318 U. S.
272-275. A different result was reached in
Public
Utilities Comm'n v. United States, 355 U.
S. 534, where the Court held that California could not
apply its law regulating intrastate transportation rates to the
carriage of strategic military supplies of the United States. The
Court discussed at length the peculiarly burdensome
Page 371 U. S. 272
effect that the state regulation there involved would have upon
the shipment of this kind of freight, stressing the difficulty and
delays involved in classifying such goods under existing state
tariffs, and the importance to the national security of secrecy and
rapid movement. 355 U.S. at
355 U. S.
544-546. Regardless of any impact on transportation
costs, therefore, enforcement of the State's regulatory scheme was
barred because it constituted a direct interference with the
performance of a vital federal function.
M'Culloch
v. Maryland, 4 Wheat. 316. The opinion in the
California Commission case also discussed the 1947 Armed Services
Procurement Act, [
Footnote 2/4] but
nowhere suggested that the 1947 Act had changed the law upon which
the decision in
Penn Dairies had rested. Rather, the Court
distinguished the
Penn Dairies case on the ground that the
Pennsylvania milk marketing statute had not subjected the National
Government or its officers to any direct restraints, as did the
California legislation. 355 U.S.
355 U. S.
543-544.
The Court today abandons that distinction and, for the first
time, suggests that the 1947 Act did, in fact, change the federal
procurement policy in effect at the time of the
Penn
Dairies decision. I think this novel interpretation of the
statute which is the basis of all federal procurement, civilian as
well as military, [
Footnote 2/5] is
incorrect, and that
Page 371 U. S. 273
any doubt which could ever have existed on that score has been
laid to rest by the amendment to the 1947 statute enacted at the
last session of Congress. [
Footnote
2/6]
There is simply no support in any of the pertinent legislative
materials for the conclusion that Congress, solely in order to save
a few dollars, intended to permit federal agencies to subvert
general and nondiscriminatory state
Page 371 U. S. 274
regulatory measures which promote health, safety, or better
working or economic conditions. Indeed, Congress has evidenced a
directly contrary intention. Of course, as the decision in the
California Commission case demonstrates, state law cannot
be allowed to impair fulfillment of appropriate federal functions,
be they civil or military; similarly, state measures contrary to
national policy cannot be allowed to bind or inhibit federal
activities. This case, however, presents no such problems. The only
issue is whether Congress has or has not expressed a desire to
bypass valid state regulatory legislation in the conduct of federal
procurement activities.
The 1947 Armed Services Procurement Act was proposed to Congress
jointly by the War and Navy Departments. During World War II, these
Departments had run their procurement operations with a relatively
free hand under the First War Powers Act, 55 Stat. 838, which
authorized placement of contracts without regard to existing
provisions of law regulating procurement procedures. The War
Production Board had early determined that the traditional method
of procurement by advertising for sealed competitive bids was
unsatisfactory during wartime, and had adopted the practice of
placing contracts by direct negotiation with suppliers. [
Footnote 2/7] When the war ended, the need
arose to return to a peacetime system of procurement, and the 1947
bill was introduced to fill this need. At the same time, the
military departments thought that the prewar procurement statutes
were "woefully inadequate for supplying the tremendously expanding
needs for military supplies and equipment," [
Footnote 2/8] and that
Page 371 U. S. 275
"a total reversion to prewar methods would be unfortunate in the
extreme, and would severely handicap the War and Navy Departments.
. . . [
Footnote 2/9]"
Reflecting this attitude, the Departments stressed three major
objectives of the new legislation they proposed:
"1. To modernize peacetime military procurement methods;"
"2. To unify the procurement legislation under which the War and
Navy Departments do their buying; and"
"3. To permit suspension of advertising as a method of
procurement upon the declaration of a national emergency. [
Footnote 2/10]"
The third purpose, to provide authority to suspend competitive
bidding in a national emergency, was simply intended to eliminate
the need for legislation in time of crisis, and thus to enable the
defense establishment to respond immediately to such emergencies.
[
Footnote 2/11] As for the
second, prior to the war, each branch of the armed services had
been governed by its own separate, and sometimes unique,
procurement legislation. The 1947 Act was intended to substitute a
single statute for all military procurement. [
Footnote 2/12]
The proposal to "modernize" the law was primarily a proposal to
relax, in certain situations, the very strict rule requiring that
almost all contracts be placed through advertising competitive
bidding. Experience had shown
Page 371 U. S. 276
that the formalized ritual of competitive bidding was often
unwieldy and uneconomical. For example, competitive bidding was not
suited to contracts involving secret projects, nor for contracts
involving items for which there was no effective competition
between sellers. For these types of procurement, the bill proposed
direct negotiation between the Government and available suppliers.
The heart of the proposed bill was § 2(c), now 10 U.S.C. § 2304(a),
which set out a list of 15 specific exceptions to the rule of
competitive bidding. [
Footnote
2/13]
The bill was reported out and passed in essentially the same
form as proposed. Both the House and Senate Reports made clear that
the purposes of the bill remained the same. The House Report began
by saying,
"This bill provides uniform purchase authority for the Army and
Navy, and reestablishes the requirement that the
advertising-competitive bid method shall be followed by those
Departments in placing the great majority of their contracts for
supplies and services. [
Footnote
2/14]"
The Report went on to acknowledge that there are "a limited
number of situations [in which] the public interest requires that
purchases be made without advertising," and it listed most of the
specific exceptions proposed by the War and Navy Departments.
[
Footnote 2/15] It was at this
point, after describing the purpose to unify procurement laws and
to relax the previously rigid advertising requirements, that the
House Report summed up by describing the bill as
"a comprehensive revision and restatement of the laws
governing
Page 371 U. S. 277
the procurement of supplies and services by the War and Navy
Departments."
Id. at 6. [
Footnote
2/16]
The background of the 1947 Act thus makes it abundantly clear
that the "revision and restatement" of law involved in its
formulation had absolutely nothing to do with the issue dealt with
in
Penn Dairies and presented by the case now before us.
The dissatisfaction with existing prewar procurement law centered
upon its lack of uniformity and its apparent insistence upon the
ritual of competitive bidding in situations for which such
procedures were unsuited. Neither of these major concerns touched
upon the problem presented by the present case -- whether federal
procurement transactions were to undermine valid state laws
regulating price. [
Footnote
2/17]
Evidence is not lacking, however, of the attitude of Congress
with respect to that problem, and I think such evidence clearly
shows that Congress presumed and intended that federal procurement
was to be conducted subject to valid state price and rate
regulation of otherwise general applicability.
First, it is clear from the Act itself that Congress was not
willing to override other important social and economic policies in
blind pursuit of the lowest possible purchasing price. The Act
commands procurement officers to consider many other factors in
addition to price. For instance, § 8 directs compliance with the
Walsh-Healey Act, the Davis-Bacon Act and the Eight Hour Law.
[
Footnote 2/18]
Page 371 U. S. 278
And in § 2(b), Congress declared that a fair proportion of
purchases and contracts made under the chapter should be placed
with small business. [
Footnote
2/19]
Secondly, while the legislative history of the 1947 Act contains
only a few references to the specific problem of price-regulated
industries, these references clearly reflect an acknowledgment that
state price regulations are to apply to suppliers doing business
with the Government. The statements in question relate to §
2(c)(10) of the bill as enacted, now 10 U.S.C. § 2304(a) (10). The
subsection provides that the head of an agency need not employ the
advertised bid method when
"(10) the purchase or contract is for property or services for
which it is impracticable to obtain competition."
This exception to the normal bidding procedure was first enacted
in the Army Appropriations Act of 1901, 31 Stat. 905. Until 1947,
it applied only to Army procurement, and one of the purposes of the
Act was to make the exception applicable to all services. [
Footnote 2/20] In explaining the existing
law on this subject, Under Secretary Royall of the War Department,
chief spokesman for that Department, made the following
remarks:
"As to the exception which deals with supplies or services for
which it is impracticable to secure competition, this language
originally appeared in the act of March 2, 1901 (31 Stat. 1905; 10
U.S.C. 1201), and has been the subject of a number of highly
restrictive administrative interpretations. In my opinion,
Page 371 U. S. 279
this exception is intended to apply in at least these three
situations:"
"1. Where the nature of the supply or service is such that only
one person can furnish it, for example, a patented or secret
article."
"2.
Where the price of the supply or service has been
legally fixed."
"3. Where the practical circumstances are such that it would be
difficult to secure real competitive proposals by means of
advertising for formal bids."
(Emphasis added.) [
Footnote
2/21]
The Senate Report expressly acknowledged the applicability to
federal procurement activities of laws regulating prices.
"The experiences of the war and contracts negotiated since the
war in the fields of stevedoring, ship repairs, chartering of
vessels,
where prices are set by law or regulation, or
where there is a single source of supply, have shown clearly that
the 'competitive bid advertising' method is not only frequently
impracticable, but does not always operate to the best interests of
the Government."
(Emphasis added.) [
Footnote
2/22]
The plain meaning of these references to price regulation is
that both Congress and the Departments concerned assumed such price
regulation would apply to government purchases. Unless this
assumption is made, there would be no reason for believing that
competition would be "impracticable" in these areas. For, absent
the duty of suppliers to comply with uniform price regulations,
it
Page 371 U. S. 280
would not be "impracticable" to advertise for bids at
competitive prices.
Apart from the clear import of these references, it is also
significant to note that both the Departments and the sponsoring
congressional committees were aware of the fact that governmental
price-fixing would affect the nature of competition for procurement
contracts. Yet not once did any spokesmen for the Departments
question or even mention the rule of the
Penn Dairies
decision, of which they could hardly have been unaware. [
Footnote 2/23] Indeed, they consistently
testified that § 2(c)(10) was, as to regulated prices, merely a
restatement of the existing law. [
Footnote 2/24]
Despite this clear legislative history, it is said that the
statutory authorization to "negotiate" in cases where
competitive
Page 371 U. S. 281
bidding is not appropriate reflects a policy to allow
procurement officers to bargain for prices lower than those set by
state regulatory agencies. [
Footnote
2/25] If all we had to go on were this provision of the 1947
Act, there might be an arguable basis for an inference of such a
federal procurement policy, since the 1947 statute nowhere defined
the word "negotiation." [
Footnote
2/26] Just last year, however, Congress added an amendment to
the Act in which it defined "negotiation" for the first time.
Although the definition generally adopts and implements the
ordinary meaning of the word -- to bargain for a lower price -- it
expressly excepts price-regulated transactions. The amendment
provides in pertinent part:
"(g) In all negotiated procurements in excess of $2,500 in which
rates or prices are not fixed by law or regulation and in
which time of delivery will permit, proposals shall be solicited
from the maximum number of qualified sources consistent with the
nature and requirements of the supplies or services to be procured,
and written or oral discussions shall be conducted with all
responsible offerors who submit proposals within a competitive
range, price, and other factors considered. . . . [
Footnote 2/27]"
(Emphasis added.)
Page 371 U. S. 282
In the words of the floor manager of the bill in the House,
price-regulated transactions were excepted because they were
"instances where it would be futile to have discussions." [
Footnote 2/28] In short, it is clear that
Congress has now explicitly declared what was adumbrated in the
legislative history of the 1947 Act -- that federal procurement is
to be conducted subject to valid state price and rate regulations
of otherwise general applicability. [
Footnote 2/29]
While the Court's opinion discusses this legislative history, I
read the opinion as resting primarily on the Court's reading of
certain executive regulations issued under the authority of the
procurement law. In this I think the Court errs -- for two reasons.
First, if I am
Page 371 U. S. 283
right in the view that the statute recognizes that federal
procurement is not to be immunized from the impact of valid state
economic legislation, then any regulations to the contrary are
completely invalid.
Williamson v. United States,
207 U. S. 425,
207 U. S. 462;
Lynch v. Tilden Produce Co., 265 U.
S. 315,
265 U. S.
321-322;
United States v. Barnard, 255 F.2d
583, 588-589. Secondly, I think that the regulations upon which the
Court relies do not speak with so clear a voice as the Court would
have us believe. The Court can find not a single regulation of
either general or specific application which says, in so many
words, that a procurement officer may, in his discretion, negotiate
a contract in disregard of valid state price regulation.
II
I agree with the conclusion in Part III of the Court's opinion
that it is not now possible to undertake final resolution of the
Government's claim that the sales of milk involved in this case
take place on federal enclaves within the scope of Art. I, § 8, cl.
17, and therefore are immune from state regulation under the rule
of
Pacific Coast Dairy v. Department of Agriculture,
318 U. S. 285.
Even if these military installations are now such federal enclaves,
this claim will be moot if the substance of California's milk
regulation scheme antedated the acquisition of exclusive
jurisdiction by the Federal Government. The concept of exclusive
jurisdiction "has long been interpreted so as to permit the
continuance until abrogated of those rules existing at the time of
the surrender of sovereignty. . . ."
James Stewart & Co. v.
Sadrakula, 309 U. S. 94,
309 U. S. 99.
This question of priority cannot be decided on the record before
us, and its resolution, therefore, first requires a remand of the
case to the District Court. If I am right in my view of the federal
procurement law, a finding that state regulation was imposed before
these
Page 371 U. S. 284
military installations became federal enclaves within the scope
of the constitutional provision would mean that all sales of milk
at issue in this case, regardless of the source of funds, would be
subject to the legislation which California has validly enacted to
stabilize and make economically sound the business of producing and
marketing a commodity vital to the health and welfare of her
people.
[
Footnote 2/1]
U.S.Const. Art. I, § 8, cl. 12.
[
Footnote 2/2]
U.S.Const. Art. VI, cl. 2.
[
Footnote 2/3]
It is to be emphasized that the issue in this case is not
whether federal procurement officers must themselves undertake to
enforce regulatory state laws. The scope of the state regulatory
system and its validity are questions properly reserved for state
agencies and courts, acting upon members of the regulated industry,
subject to review by this Court of any federal issues presented.
The only issue in this case is whether a State may itself enforce
its regulatory legislation against those who deal with the Federal
Government.
[
Footnote 2/4]
62 Stat. 21, as amended, 10 U.S.C. §§ 2301-2314.
[
Footnote 2/5]
It should be noted that the Court's decision today is likely to
affect federal, as well as state, price regulation. For example, a
large part of the milk marketing regulation in the United States is
presently accomplished under federal marketing orders pursuant to §
8c of the Agricultural Adjustment Act, as amended, 7 U.S.C. § 608c.
See 7 CFR § 1001
et seq. Federal marketing orders
typically maintain minimum producer prices, and this regulation, in
turn, has the effect of maintaining a certain level of handler
prices.
See, e. g., Lehigh Valley Coop. Farmers, Inc. v. United
States, 370 U. S. 76,
370 U. S. 78-83.
It is perhaps for this reason that the Government has abandoned its
attack upon California's producer price regulation in the present
case. The Government's change of position, however, is only a
matter of discretion, and it can hardly be contended that a scheme
of producer price maintenance would be any less in conflict with
the Court's view of federal procurement policy.
I fail to see how the Court can limit its finding of conflict to
state regulatory systems. Any thought that federal milk regulation
may somehow be distinguishable necessarily supposes that Congress
would have desired immunity from the burdens of state regulatory
laws, while at the same time acquiescing to the very same economic
burdens when they arise under a federal marketing order -- an
assumption not only incongruous, but also inconsistent with express
congressional policy to treat both state and federal marketing
legislation as complementary parts of a single scheme.
"[I]n order to obtain uniformity in the formulation,
administration, and enforcement of Federal and State programs
relating to the regulation of the handling of agricultural
commodities or products thereof, [the Secretary is directed] to
confer with and hold joint hearings with the duly constituted
authorities of any State, and is authorized to cooperate with such
authorities. . . ."
7 U.S.C. § 610(i).
The problem is not academic. It has already arisen in one
unreported case in which a handler selling to a military
installation asserted immunity from an otherwise applicable federal
marketing order on the ground that the order was in conflict with
military procurement policy. The district judge rejected the
contention on the ground that any increase in cost would be
justified by the Government's interest in maintaining a stable
supply of milk.
Knudsen Bros. Dairy, Inc. v. Benson, Civil
No. 8145 (D.C.D.Conn., August 18, 1960).
[
Footnote 2/6]
Since the present case calls for an in futuro injunction against
enforcement of state regulatory statutes, all federal laws
currently in force are relevant to our decision.
[
Footnote 2/7]
W.P.B. Directive No. 2, March 3, 1942.
See Hearings on
H.R. 1366 before Subcommittee No. 6 of the House Committee on Armed
Services, 80th Cong., 1st Sess., No. 51 at 469 (February 4, 1947).
(Hereinafter cited as February House Hearings.)
[
Footnote 2/8]
February House Hearings at 469 (statement of W. J. Kenney,
Assistant Secretary of the Navy).
[
Footnote 2/9]
Hearings on H.R. 1366 and H.R. 3394 before the Senate Committee
on Armed Services, 80th Cong., 1st Sess. 8 (June 24, 1947)
(statement of Secretary Kenney). (Hereinafter cited as June Senate
Hearings.)
[
Footnote 2/10]
Id. at 7.
[
Footnote 2/11]
See, e.g., February House Hearings at 469.
[
Footnote 2/12]
Ibid.
[
Footnote 2/13]
Ibid. See also Hearings on H.R. 1366 and H.R.
1382 before Subcommittee No. 6 of the House Committee on Armed
Services, 80th Cong., 1st Sess., No. 4 at 27 (January 13, 1947)
(statement of Robert P. Patterson, Secretary of War). (Hereinafter
cited as January House Hearings.)
[
Footnote 2/14]
H.R.Rep.No.109, 80th Cong., 1st Sess. 3.
[
Footnote 2/15]
Ibid.
[
Footnote 2/16]
Id. at 6. The Senate Report said substantially the same
thing. S.Rep.No.571, 80th Cong., 1st Sess. 1-2.
See also
93 Cong.Rec. 2319.
[
Footnote 2/17]
Nothing to the contrary can be derived from statements
describing the bill as a return to a general rule of competitive
bidding. Any legislation reactivating peacetime procurement methods
would inevitably be a return to competitive bidding after a wartime
regime of procurement by negotiation.
[
Footnote 2/18]
62 Stat. 24, as amended, 10 U.S.C. § 2304(f).
See
S.Rep.No.571, 80th Cong., 1st Sess. 20.
[
Footnote 2/19]
62 Stat. 21, as amended, 10 U.S.C. § 2301.
[
Footnote 2/20]
February House Hearings at 521 (statement of Colonel P. W.
Smith); June Senate Hearings at 29 (statement of Secretary
Kenney).
[
Footnote 2/21]
Hearing on H.R. 1366 before the Senate Committee on Armed
Services, 80th Cong., 1st Sess. 15 (July 1, 1947). (Hereinafter
cited as July Senate Hearings.) Secretary Royall repeated the
explanation in a colloquy with Senators Byrd and Kilgore.
Id. at 23.
[
Footnote 2/22]
S.Rep.No.571, 80th Cong., 1st Sess. 8.
[
Footnote 2/23]
The Departments' request for authority to attack bid prices
which "were not independently reached in open competition," 10
U.S.C. § 2304(a)(15), dealt with the altogether different problem
of collusive pricing of the type generally violative of the
antitrust laws. The Senate Report on the 1947 Act explains:
"This paragraph will be most useful to break collusive bidding,
'follow the leader' pricing, rotated low bids, identical bids
requiring drawing of lots, uniform estimating systems, refusal to
classify the Government as other than a retail buyer regardless of
the quantity purchased, and similar practices. In such situations,
the Government should have the power to inquire into the reasons
why it is not securing the benefits of competition. It should be
able to call for facts and figures, and to negotiate to eliminate
unwarranted charges, excessive reserves for contingencies,
commissions or brokerage charges, and unwarranted profits."
"
* * * *"
"On this same subject, another new subsection has been added. It
will require reference of bids suspected of not being arrived at by
open competition to the Attorney General for appropriate action
under the antitrust laws."
S.Rep.No.571, 80th Cong., 1st Sess. 4-5.
See also
January House Hearings at 26; June Senate Hearings at 9.
[
Footnote 2/24]
See testimony cited in notes
371
U.S. 245fn2/20|>20 and
371
U.S. 245fn2/21|>21,
supra.
[
Footnote 2/25]
The relevant provision of the 1947 Act provided:
"All purchases and contracts for supplies and services shall be
made by advertising . . . except that such purchases and contracts
may be negotiated by the agency head without advertising if --"
"
* * * *"
"(10) for supplies or services for which it is impracticable to
secure competition. . . ."
§ 2(c), 62 Stat. 21.
[
Footnote 2/26]
The only approximation of a definition by the Departments
proposing the bill was the statement that "[n]egotiation includes
any manner of effecting procurement other than advertising."
February House Hearings at 427.
[
Footnote 2/27]
Public Law 87-653, 76 Stat. 528. The Senate Report explains that
the amendment fills the void created by the fact that "[e]xisting
procurement law does not define the word
negotiation' except to
indicate that it means `make without formal advertising.'" S.Rep.
No. 1884, 87th Cong., 2d Sess. 2. See also H.R.Rep. No.
1638, 87th Cong., 2d Sess. 4-5.
[
Footnote 2/28]
Cong.Rec., June 7, 1962, p. 9234. In explaining the amendment to
the House subcommittee, committee counsel similarly described the
exception for price regulated transactions as one where
"negotiation would be futile or meaningless." Hearings on H.R. 5532
before Subcommittee No. 3 of the House Committee on Armed Services,
87th Cong., 2d Sess., No. 51 at 5071 (April 10, 1962).
[
Footnote 2/29]
Further illumination of this policy is furnished by subsection
(e) of the 1962 Act, 76 Stat. 528, amending 10 U.S.C. § 2306. After
providing that, in certain circumstances, contractors must certify
the correctness of their cost or pricing data, subsection (e) then
makes an exception for situations in which there will be little
question as to ultimate price:
"
Provided, That the requirements of this subsection
need not be applied to contracts or subcontracts where the price
negotiated is based on adequate price competition, established
catalog or market prices of commercial items sold in substantial
quantities to the general public,
prices set by law or
regulation or, in exceptional cases where the head of the
agency determines that the requirements of this subsection may be
waived and states in writing his reasons for such
determination."
(Emphasis added.)