Commissioned officers, including extra numbers in grade, shall be promoted to the grade of rear admiral by selection, under such regulations as the Secretary shall prescribe. The precedence on the list of rear admirals shall be determined by the date of first appointment to that grade, except that the Assistant Commandant shall, while holding such office, be next in precedence to the Commandant. In this regard it is significant that, while section 223 requires that promotion of officers to the grades of captain and below be made effective on the date of the vacancy which they are promoted to fill, no such requirement is contained in section 222. Regulations promulgated by the Secretary of the Treasury to implement the Coast Guard promotion laws are contained in paragraph 2B01186, Coast Guard Comptroller Manual, and such regulations provide that the pay of an officer of the Regular Coast Guard permanently promoted accrues only from the effective date thereof as stated in his commission or in the appointment authority issued in advance of the regular commission. This provision is substantially the same as that provided in paragraph 044206, Navy Comptroller Manual, pertaining to promotion of Regular Navy officers. It is shown that Admiral Morrison's nomination was confirmed by the Senate on March 24, 1961, and that such date is stated in the appointment authority as the effective date of the appointment. It is well settled that appointments made by and with the advice and consent of the Senate as required by section 221 of Title 14 do not become effective as appointments until a commission has been issued after confirmation by the Senate. Marbury v. Madison, 1 Cranch 137; United States v. LeBaron, 19 Howard 73; Glavey v. United States, 182 U.S. 595. In the light of such long-standing rule and in the absence of some specific statute so providing, it is our view that an appointment under the provisions of section 222 of Title 14, U.S. Code, may not legally be made effective for pay purposes prior to confirmation by the Senate in any event. We know of no law which may be applied as authorizing pay for any period prior to confirmation in such cases. In these circumstances, it is our view that the pay and allowances of Rear Admiral (LH) accrue to Admiral Morrison from March 24, 1961, the effective date stated in the appointment authority (letter of March 31, 1961, from the Acting Secretary of the Treasury). Cf. 38 Comp. Gen. 340. In answer to question (e), the verbal instructions and acknowledgment referred to therein have been viewed as tantamount to the is suance of the commission, even though there was some delay in sending the commission document. Under the rule stated above the appointment could not be made effective until the commission is issued. Your questions are answered accordingly. [B-144621] Contracts-Awards-Small Business Concerns-Self-Certification A low bidder who, in response to a total small business set-aside procurement, certifies himself as a small business concern although he is on notice by the Small Business Administration prior to the submission of the bid that his size status is subject to question, and who, after award, is ultimately determined not to be small business because of the circumstances which previously existed is not regarded as having utilized the self-certification procedure prudently as required under the Small Business Act, and, therefore, his bid may not be considered eligible for award. Contracts-Awards-Small Business Concerns-Self-Certification An award under a total small business set-aside procurement to a low large business bidder who, after certification that he was a small business concern, took action after opening of bids for the sole purpose of meeting the small business size criteria thereby qualifying for consideration, is an award to a bidder who was given a second chance and an undue advantage over other bidders and is an award which is not only destructive of the competitive bidding process but is in circumvention of the small business program and, therefore, the contract should be canceled. Payments-Absence or unenforceability of Contracts-Quantum Valebat In view of the fact that a contractor has proceeded with the work prior to the time of cancellation of a small business set-aside contract for failure of the bidder to qualify as small business, the equipment scheduled for delivery as well as that manufactured may be accepted and paid for on a quantum valebat basis. To the Secretary of the Army, August 1, 1961: Reference is made to a letter dated January 19, 1961, written in behalf of the Assistant Secretary of the Army (Logistics), furnishing a report on the protest of the E. D. Etnyre & Co., Oregon, Illinois, against the award of contract No. DA-11-184-ENG-18465 to Standard Steel Works, Inc., North Kansas City, Missouri, on the grounds that the contractor was not in fact a small business concern. Invitation for bids No. DA-ENG-11-184-61-B-20-JD issued on July 18, 1960, by the U.S. Army Engineer Office, Chicago, Illinois, solicited bids to be opened August 17, 1960, for furnishing 50 bituminous material distributors in accordance with certain specifications. The procurement was based on a 100 percent set-aside for small business-a provision in the invitation for bids providing in part as follows: NOTICE OF SMALL BUSINESS SET-ASIDE: Bids or proposals under this procurement are solicited from small business concerns only and this procurement is to be awarded only to one or more small business concerns. * * * A small business concern is a concern that: (i) is independently owned and operated, is not dominant in its field of operation and, with its affiliates, employs fewer than 500 employees, or (ii) is certified as a small business concern by the Small Business Administration. * * * Bids or proposals received from firms which are not small business concerns shall be considered non-responsive. Six bids were received in response to the invitation, including bids submitted by E. D. Etnyre & Co., Standard Steel Works, Inc., and the Seaman Corporation. The lowest bid, submitted by City Tank Corporation, was rejected because it was determined that the bidder was not small business. A bid submitted by Littleford Bros., Inc., was considered to be nonresponsive in that the initial delivery date was later than that required by the Government. In a report dated July 7, 1961, from the Small Business Administration which details the circumstances surrounding the submission of Standard Steel Works' bid it is stated that: 1. On June 9, 1960, the Kansas City, Missouri, Office of the Small Business Administration received a telegram request from the St. Louis Office of the Small Business Administration for a size determination of Standard. This request was predicated upon an inquiry by the St. Louis Air Procurement District. 2. The Kansas City Office replied to this request, on June 23, 1960, that the subject concern could not, in its opinion, qualify as a small business but that the matter was being submitted to the Washington, D.C. Office for determination. 3. In order that a proper determination of Standard's size status could be made, the subject concern was requested to complete Small Business Administration Form 355. This SBA Form 355, being duly completed by Standard was received by our Kansas City Regional Office on or about July 14, 1960. Copies of Standard's letter and the SBA Form 355 are attached as Enclosures (1). 4. Based upon an examination of the information furnished, the Director of the Office of Small Business Size Standards notified the Kansas City Office of the Small Business Administration on August 10, 1960, that Standard was affiliated, by virtue of stock ownership, with other concerns so that Standard could not be classified as a small business. 5. On August 12, 1960, the Kansas City Office advised Mr. Harl S. Day, President of Standard, by telephone, of this decision. Mr. Day indicated that he desired to review the decision at a later date, early in September, 1960. On September 8, 1960, Mr. Day was mailed the material for his review by the Kansas City Office. A copy of a memorandum from our Kansas City Regional Office reporting this conversation is attached as Enclosure (2). 6. On August 17, 1960, the Purchasing Division of the Chicago District, Corps of Engineers, U.S. Army, opened bids submitted in response to Invitation for Bids No. DA--Eng-11-184-61-B-20-JD. This procurement was a 100 percent small business set-aside. It is understood that Standard submitted the low bid on this procurement, on August 16, 1960, and certified itself as a small business concern, An examination of the completed SBA Form 355 signed on July 7, 1960, by H. S. Day as President of Standard Steel Works, Inc., reveals that under item 4 thereof entitled "Affiliates of Applicant" the only affiliated company listed is the Aero-Test Equipment Co., Inc., of Dallas, Texas. Immediately above item 4 on the face of the form appear the following provisions: Affiliation. Business concerns are affiliates of each other when either directly or indirectly (a) one concern controls or has the power to control the other, or (b) a third party controls or has the power to control both. In determining whether concerns are independently owned and operated, and whether or not affiliation exists, consideration shall be given to all appropriate factors including common ownership, common management, and contractual relationships. a. The following is a list of factors, the existence of any of which raises a presumption of affiliation: (1) Common Ownership: When a significant portion of the concern under consideration is directly or indirectly held by an individual (or individuals) or an associated group (family, holding company, other business entity, etc.) which also holds a similar interest in another concern, they may be said to be affiliated. (2) Common Control: When those who exercise or may exercise significant control over the concern under consideration, can also exercise similar control over another concern, the concerns may be said to be affiliated. This control may arise as an incident of ownership, or it may arise through interlocking management such as common directors or common officers. (3) Affiliation by Agreement: Where there exists actual or tacit agreements relating to the operation of the concerns involved between individuals or associated groups having significant ownership or control of concerns, these concerns may be said to be affiliated. These agreements may embrace a wide variety of subjects, including use of common facilities (both physical and management facilities such as common general counsel, purchasing or selling agency, bank account, etc.), purchasing activities methods of doing business, and the like. The fact that the applicant may be a division of a company, a subsidiary or affiliate, must be considered in making a size determination, even though the applicant and its affiliates are not primarily engaged in the same field of operation. In making a size determination the total size of the applicant and its affiliates, regardless of business activity, will be considered. A cover letter dated July 7, 1960, by Mr. Day addressed to the Small Business Administration in Kansas City accompanied the completed SBA Form 355. That letter reads in part as follows: Enclosed are the completed forms #355 for size determination which you requested. I am sorry that it has taken this much time to get together the information that is required for these forms. You have consistently raised the question of affiliation, and the only factor that can be considered affiliating us with any companies, except the one shown under Paragraph 4 of your form, is the point of Common Ownership. As I have consistently pointed out to you, we do not have common control, common management nor any actual or tacit agreements relating to the operation of this company with any other. Common ownership is a little tougher one to delineate. Standard Steel Works is actually owned by a group of companies, with stock ownership as follows: 350 shares-George Washington Life Insurance Co.-Dallas, Tex. The fact that these insurance companies may also own stock in other companies does not, in my interpretation of the regulation, constitute affiliation by common ownership. It is on the above basis that I disclaim any affiliation, under the terms of the Small Business Administration, with any companies except the one shown on the form. This company, which is shown as an affiliate, has been successful in obtaining a Small Business Certificate, which may indicate that some investigation has already been made along this line. In a letter to this Office by the attorney of Standard Steel Works dated July 10, 1961, it is stated that Mr. Day stated to him unequivocally that although he probably did have a telephone conversation with a Mr. Woodward of the SBA Kansas City Office on August 12, Mr. Woodward did not advise him that any determination had been made that Standard Steel Works was affiliated with Reserve Life Insurance Company and was, therefore, a big business. Standard Steel Works' attorney further reports that Mr. Day stated that if such a determination had been communicated to him, Standard would not have submitted a bid on August 16 and that he would have written a letter of protest immediately along the same lines of his letter of October 31, 1960, which protested a determination of October 28, 1960, that Standard was not a small business concern. After bid opening, which occurred on August 17, 1960, and while the bids were being evaluated, the E. D. Etnyre Company wired the contracting office on October 10, 1960, followed by a letter of the same date, alleging that Standard was not small business. Also, on that date the contracting office telephoned the District Engineer, St. Louis, Missouri, and requested him to supply the affiliations of Standard. The District Engineer replied on October 11, that the president of Standard had stated that Reserve Life Insurance Company of Texas owned four-sevenths of the stock of Standard but that Standard operated "completely independent with no common management function, no common technical function, and no common financial or capitalization function other than stock ownership by Reserve." Also, the president had stated that Standard owned Aero-Test Equipment Company, Dallas, Texas, employing 60 to 70 persons. The following day, October 12, the contracting office asked the SBA regional office, Kansas City, to make a determination as to the small business status of Standard. On October 27, 1960, the Acting Deputy Administrator, SBA, wired the contracting office that he had determined that Standard was "not a small business for Government procurement" and Standard was informed of this determination on October 28. Whereupon on November 2, 1960, Standard advised the contracting office that it was appealing the determination by SBA. Thereafter, during the month of November 1960, the attorney for Standard contacted the SBA office in Washington, D.C., with regard to the possibility of changing the stock ownership of Standard. In a letter dated November 11, 1960, the attorney advised SBA as follows: As now issued, the stockholders of Standard Steel Works, Inc. are: Reserve Life Insurance Company-4,400 shares George Washington Life Insurance Company-350 shares We propose to change by Charter Amendment the type of stock which the corporation can issue where that it will have voting and nonvoting common stock. We hope to authorize 1,000 shares of $100.00 par value common voting stock and 6,000 shares of common $100.00 par value nonvoting stock. After the Charter Amendment and the Insurance Companies have elected to take voting and nonvoting stock, the stock ownership of Standard Steel Works, Inc., will look as follows: VOTING STOCK Fidelity National Life Insurance Company-600 shares |