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Representative WOLVERTON. I bave it marked "199 (a) and (b)," but the report that I have before me seems to jump from page 173 to 230. Will you see if you can find the page 200 in this copy that I now have?

Now, directing your attention to the page 200, do you have a summary of those items to which exception has been taken because the contracts were not advertised for, or not given to the lowest bidder, or for any of the other reasons that you have set forth; and maybe it would be helpful if in giving that summary you would just state the basis of your objection to that particular amount, whatever it might be.

Mr. Tulloss. I don't think that we have any other summary than what is shown there.

Representative WOLVERTON. There is a summary in there; I will try to find it.

Mr. Tulloss. On page 144, it shows six statements of exceptions, under different classifications, one of which is the one that we are looking at on page 200.

Representative WOLVERTON. That is the classification to which I just referred.

Mr. Tulloss. Now, the aggregate of the items under statement No. 3 is $1,001,598.87.

BASIS ON WHICH EXCEPTIONS WERE MADE

Representative WOLVERTON. Now, will you state for the benefit of the committee the basis on which exceptions were made, with respect to those items?

Mr. Tulloss. Well, in the first group the exception was on the basis of advertising in competition; there was a lack of advertising and competition under section 3709 of the Revised Statutes, aggregating $709,204.05.

Representative WOLVERTON. Does it include cases where after advertisement had been given, requesting bids, that the T. V. A. would let the contract to someone other than the lowest bidder?

Mr. TULLOSS. I believe that there were items of that character.

Representative WOLVERTON. I am certain of it if I can take your report to be a true statement of the fact, because you have it outlined here from page 200 on.

Mr. Tulloss. I think it is in there, but I am not sufficiently familiar with it at this time

Representative WOLVERTON. What I am trying to do is get the matter of record so that we can inquire into the reasonableness of the exceptions that you have taken.

Mr. Tulloss. Do you wish me to find a particular item on that point? Is that what you want?

Representative WOLVERTON. I wanted you to state just generally the basis of your exceptions, relating to that item No. 3, appearing on page 134, which is $1,001,928.87.

Mr. Tulloss. The first group, as I said, had reference to advertising and competition. The item, aggregating $709.204.05, appears to have been excepted to because the low bid was not accepted.

Representative BARDEN. Is that in your report? That is the exact statement of the report?

Mr. Tulloss. I am reading from the report; yes, sir.

POSITION OF ACCOUNTING OFFICE RE LETTING CONTRACTS

Representative WOLVERTON. What is the position of the General Accounting Office with respect to the necessity of the T. V. A. advertising for bids and allowing the contract to the lowest bidder?

Mr. Tulloss. The position of the General Accounting Office has been that section 3709, Revised Statutes, requiring competition, applies to the T. V. A.

Representative WOLVERTON. Does T. V. A. take the position that it does not apply to them?

Mr. Tulloss. It did, but the law has been amended in that respect.

Representative WOLVERTON. What is the effect of the amendment of the law?

Mr. BIDDLE. Would you read the amendment?
Mr. Tulloss. The amendment is as follows:

All purchases and contracts for supplies or services, except for personal services made by the corporation, shall be made after advertising, in such manner and at such times sufficiently in advance of opening bids, as the Board shall determine to be adequate to insure notice and opportunity for competition: Provided, That advertisement shall not be required when (1) an emergency requires immediate delivery of the supplies or performance of the services; or (2) repair parts, accessories, supplemental equipment, or services are required for supplies or services previously furnished or contracted for; or (3) the aggregate amount involved in any purchase of supplies or procurement of services does not exceed $500; in which cases such purchases of supplies or procurement of services may be made in the open market in the manner common among businessmen: Provided further, That in comparing bids and in making awards the Board may consider such factors as relative quality and adaptability of supplies or services, the bidder's financial responsibility, skill, experience, record of integrity in dealing, ability to furnish repairs and maintenance services, the time of delivery or performance offered, and whether the bidder has complied with the specifications.

Representative WOLVERTON. When was that amendment passed?

Mr. Tulloss. That was an amendment carried in the act of August 31, 1935, as I recall.

Representative WOLVERTON. Prior to that amendment, then, these instances happened that are set forth in your report for 1934, in which the Tennessee Valley Authority did not hold themselves accountable to purchase under the provisions of section 3709?

Mr. Tulloss. Yes, sir.

Representative WOLVERTON. Which required the advertising of bids and the letting of contracts to the lowest bidder?

Mr. Tulloss. That is right.
Representative BARDEN. May I ask the witness a question?
Do you know what their reason was for not accepting the low bid?

Mr. Tulloss. My recollection is that generally they felt that these general statutes with reference to —

Representative BARDEN. Now you are talking about a specific item there, aren't you?

Mr. Tulloss. I am speaking generally of all contracting. My recollection is that the Tennessee Valley Authority took the position that section 3709 was not applicable to purchases made by it.

Representative BARDEN. I know, but wasn't Mr. Wolverton asking you about a specific item that led to that question?

Mr. Tulloss. I understood his question to be addressed to a group of items, of purchase, where we had taken exception because the low bid had not been accepted as contemplated by section 3709 of the Revised Statutes.

Representative BARDEN. Well, you haven't any specific item there that you could say why they refused the low bid on any particular item?

Mr. Tulloss. Well, my statement here merely gives our version of it.

Representative BARDEN. Have they replied to that?

Mr. Tulloss. We have a reply, and I was speaking of their general reply on other matters of this kind.

We have a reply in detail; whether they have covered this item that we are now discussing, I am not sure.

REASONS FOR AUTHORITY REFUSING BIDS

Mr. BIDDLE. May I follow the Congressman's thought a little further? He asked you, I think, the reason why the T. V. A. should not have accepted the low bid. Your answer was that they held the statute not applicable, but wasn't his question directed rather to the reason why the bid should have been accepted and were not some of the T. V. X.'s reasons for not accepting these bids outlined in a resolution of the Board, which was largely the basis of the amendment to the act? In other words, weren't some of the bases for refusing these bids, emergency,

requiring immediate delivery of supplies or performance of services? That was one ground was it not?

Mr. Tulloss. I am sorry, that I misunderstood the question. That is correct.

Mr. BIDDLE. And was not another ground, that repair parts, accessories, supplemental equipment, or services, were immediately required?

Mr. Tulloss. Yes, sir.

Mr. BIDDLE. Were not other grounds the past performance, and the integrity of the bidder, which were taken into consideration occasionally in rejecting low bids?

Mr. TULLOSS. I think so. I am not sure.

Mr. BIDDLE. So that these grounds which the T. V. A. gave you, as having been the bases under these items totaling some $700,000, of having refused the low bidder, and on the legal ground that the statute requiring the lowest bidder to be accepted was not applicable under the T. V. A. Act, were not they thereafter written into the amendment of the law right along the lines under which the T. V. A. had already been operating?

Mr. Tulloss. I cannot say that it is along the line that the T. V. A. was operating. I don't know to what extent the amendment conforms to the declared policy of the T. V. A. in that respect.

Mr. BIDDLE. And how many exceptions, or rather, I beg your pardon, to what extent has the exception totaling that sum of $700,000 been recommended for withdrawal by field auditors?

Mr. Tulloss. I do not know.

Mr. BIDDLE. You don't know-it is a substantial amount that has been recommended for withdrawal?

Mr. Tulloss. I don't know.
Mr. BIDDLE. You don't know even that?
Mr. Tulloss. No, sir.

Mr. BIDDLE. Where an exception is taken to a bid as not being the low bid, is it taken to the entire amount of the bid?

For instance, if the low bid is $1,000 and the T. V. A. accepted bid is $1,010, is your exception $1,010 or $10?

Mr. Tulloss. It is $1,010. In other words, the question runs to the legality of the entire bid.

Mr. BIDDLE. The entire bid?
Mr. TULLOSS. Yes.

Representative WOLVERTON. Did you have difficulty with the T. V. A. before the passage of that amendment, to get them to observe the provisions of section 3709, as interpreted by the General Accounting Office, and applied to other departments of Government, to let bids to the low bidder?

Mr. Tulloss. As I recall, there was much correspondence on that, and my recollection is that we were not in agreement as to the interpretation of the law-in other words, the T. V. A. took the position or had the view that we were wrong in insisting that section 3709 Revised Statutes should be followed by it.

Representative WOLVERTON. I read last night such part of the correspondence to which you refer as appears in this report of 1934. It certainly indicates that there was a very decided difference in opinion on that matter.

Mr. Tulloss. That is my recollection of it. Representative WOLVERTON. Now, did you have the same difficulty with other departments of the Government?

Mr. Tulloss. Well, there have been differences of view from time to time but I think generally speaking the regular establishments of the Government conform with section 3709 of the Revised Statutes.

Representative WOLVERTON. In this respect, the T. V. A. again takes the position. which is consistent with that which you discussed a day or two ago, that they are an agency outside of the regular departments of Government?

Mr. Tulloss. I think that that would be a fair assumption; yes, sir.

Representative BARDEN. May I ask-that question has been raised about various departments in the Government, even the Comptroller's office, has it not?

Mr. Tulloss. Yes, sir.

Representative BARDEN. I believe that just in line with that thought, I believe as far back as President Hoover's message of December 9, 1932-I quote:

The General Accounting Office was created by the Budget and Accounting Act of June 10, 1921. The primary purpose of creating the General Accounting Office was to establish an independent agency to take over the powers and duties formerly imposed by law on the Comptroller of the Treasury and the six auditors of the Treasury Department.

You agree with that?
Mr. Tulloss. Yes, sir; that is correct.
Representative BARDEN (reading):

It was believed by the Congress that the function of auditing the receipt and expenditure of accounts of the Government should be separate and independent from any of the executive departments.

You agree with him there?
Mr. TULLOSS. Yes.
Representative BARDEN (reading):

The separation of this audit function from the executive departments, and placing the responsibility of audit of all of the receipts and expenditures accounts in an establishment that is independent of all others is believed to follow a sound principle and one that should be strictly adhered to.

You agree with him there? Mr. Tulloss. Yes, sir; I do. Representative BARDEN (reading): The Budget and Accounting Act, however, went further than to centralize the audit functions in a separate independent establishment. It conferred upon the General Accounting Office duties of an administrative and executive character. The wording of the act has been interpreted to permit the General Accounting Office to extend its powers and duties into the field of administration in several departments and establishments of Government, to an extent that is far beyond its primary function.

Do you agree with him there?
Mr. Tulloss. No, sir.

Representative BARDEN. I will let you and Mr. Hoover fight that out. This matter of departmental disagreements is not a new thing?

SECTION 3709 REVISED STATUTES

Authority.

Mr. Tulloss. No, sir; section 3709 Revised Statutes has probably been amended more than any other law. In the beginning, it provided no exceptions, and most every department and establishment now has some exception to the provisions of section 3709, and that is because each has the burden of procuring supplies of a negligible value. Some of them, for instance, have an exception of $25, and others $50, or $100, or $500, as in the case of the Tennessee Valley

Representative BARDEN. Don't you think it is absolutely necessary for these departments to have some leeway to carry on their operations without having to go through the trouble of having to come up to Washington to ask you whether or not they can buy a typewriter?

Mr. Tulloss. I am entirely in harmony with it, that is the law, the trouble here

Representative BARDEN. On an operation the size of the T. V. A., of necessity they must have some leeway?

Mr. Tulloss. I agree, and the difficulty that we had here, was that the law provided no exception as to the T. V. A., practically every one of these amendments that have been enacted have been by reason of exceptions by the auditors, because there was not that exception, as to these small items, and the Congress made it possible for us to pass those items without exception.

Representative Barden. You place the construction on the T. V. A. law that they did not have the right?

Mr. Tulloss. Yes. Representative BARDEN. They put the construction on it that they did have the right?

Mr. Tulloss. Yes, sir.

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