the class of eligible donees to whom the Navy may make donations have been substantially increased by recent legislation. The limited authority of the Acts of February 14, 1927 (44) Stat. 1096, 34 U. S. Code 546a) and May 23, 1930 (46 Stat. 378, as amended, 34 U. S. Code 546c) was broadened by Public Law 889, 80th Congress, 62 Stat. 1233, to include not only eligible schools, colleges, and universities but also other educational activities, state departments of education, or other such agencies as may be designated by state law to receive donations for redistribution among educational institutions within the state. To be eligible, educational institutions must be exempt from Federal taxation under Section 101 (6) of the Internal Revenue Code. Concerning the classes of property which may be donated, the law includes any equipment, materials, books, and other supplies which may be obsolete or no longer needed by the Navy and certified by the United States Commissioner of Education to be of use for educational puposes.

Although Public Law 889 does not require donations to be made but only authorizes each of the Secretaries of the military departments in their discretion to make donations, the law does require that all property so donated shall be allocated on the basis of need and utilization by the United States Commissioner of Education among the eligible donees. Further, the law authorizes the Secretaries to donate property determined by them to be of use for educational purposes to educational activities of special interest to the armed services, such as Maritime academies or Military, Naval, Air Force, or Coast Guard preparatory schools. It should be noted that such activities are not required to be exempt under the Internal Revenue Code in order to qualify. Regulations pertaining to donations to educational institutions are set forth in Paragraph 210 of Navy Property Redistribution and Disposal Regulation No. 1. The furnishing of Navy property to foreign countries has become of increasing importance in recent years and is the subject of a number of statutes, court decisions, and opinions of the Attorney General. As indicated earlier, Article IV, Section 3 of the Constitution is applicable in most instances and Congress must, therefore, specifically authorize the Navy to

furnish material to foreign countries. The Lend-Lease Act of World War II is the outstanding example. Congress has, from time to time, enacted legislation to carry out other programs of foreign aid. Public Resolution 83 of June 15, 1940 (54 Stat. 396, 22 U. S. Code 521 et seq.) authorizes the Secretaries of the Army and Navy to furnish vessels and other implements of war to the American Republics; Public Law 454, 79th Congress, (60 Stat. 315, 50 U. S. Code App. 1861) authorizes the furnishing of Navy property to the Philippines; and Public Law 512, 79th Congress, (60 Stat. 539, 50 U. S. Code App. 1871), and Public Laws 75 and 474, 80th Congress, (61 Stat. 103, 22 U. S. Code 1401; 62 Stat. 161) authorize the furnishing of similar aid to China and to Greece and Turkey. Such laws require both imagination and a liberal construction to carry out the "intent of Congress" under current circumstances. For example, Public Resolution 83 authorizes the sale to the American Republics of vessels constructed in shipyards "under the jurisdiction of the Secretary of the Navy," and armament and equipment therefor. It is submitted that this does not mean that only armament and equipment for vessels built at one of the navy yards can be furnished, it being sufficient if the vessel was built in the United States. Public Law 75 authorizes the furnishing of articles to Greece and Turkey and the Navy, on the basis of the legislative history of the statute, has construed "articles" to include submarines.

Article 83 (3) of Navy Regulations, 1920, which authorizes the "loan" of Navy property "when such use is deemed advisable or proper by reason of a public exigency or calamity," and Articles 685 and 1385 of Navy Regulations, which relate to the furnishing of medical aid, are worthy of note. Since Navy Regulations have the force and effect of statute law when not clearly inconsistent therewith (Ex Parte Reed, 100 U. S. Code 13 (1879); 21 Op. Atty. Gen. 46 (1894), the requirements of Article IV, Section 3 of the Constitution may be deemed to be satisfied. Such logic is not comforting to the purist and one may prefer to view the authority to furnish property under such circumstances as residing in the President, as Commander-in-Chief, whose approval of the Regu

lations in effect make them his orders. In any case, the Navy relied on such authority when called upon to furnish emergency electric power in 1929 to the City of Tacoma from the turbines of the carrier USS Lexington; to furnish vaccine to prevent a threatened cholera epidemic in Egypt and Saudi Arabia in 1947; and to furnish oil on a loan basis to supply the New England States with necessary heating fuel during the severe oil shortage in that area in the winter of 1947-48.

The constitutional limitations upon the disposal of Navy property would not appear to limit the power of the President as Commander-in-Chief. Thus, while the Secretary of the Navy is without authority to furnish Government property for other than Government purposes, the constitutional authority of the President, under Article II, Section 2 of the Constitution, is not so limited (McElrath v. United States, 102 U.S. Code 426, (1880). The President, in the exercise of his authority as Commander-in-Chief, may direct the Secretary of the Navy in proper cases to make certain disposals of Navy property even though such disposals have not been specifically authorized by Congress. The over-age destroyer transfer to Britain in 1940 is an outstanding and well-publicized example. In that case, Attorney General Jackson, in an opinion in 39 Op. Atty. Gen. 484 (1940), concluded that the President was acting within his authority as Commander-inChief to order the delivery of Navy destroyers in exchange for bases although specific statutory authority approving the exchange did not exist. In the same vein, see the opinion in 40 Op. Atty. Gen. No. 55 (1941) which approved the furnishing of instruction and equipment to British flying students. As the latter opinion states, "These powers (of the President) exist in time of peace as well as in time of war." However, the facts and circumstances, as well as the climate of the times, have a direct bearing on the necessity of such action in the interest of the defense and security of the United States and whether or not such action is within the constitutional authority of the President. Despite the difficulties of determining when, if at all, specific statutory authorization is required under Article IV, Section 3 of the Constitution, it is, clear that such authorization is

not necessary to support every act of the President either as Commander-in-Chief or as Chief Executive. It is not surprising, therefore, that the few court decisions and opinions of the Attorney General on the subject have dealt only with the precise issue presented and have expressly avoided any attempt to delimit the extent of the President's power in this respect.

The number of special statutes relating to property disposal seems infinite. In addition to those above mentioned, such statutes range from Public Law 439, 80th Congress (62 Stat. 71, 14 U. S. Code 50g) (which authorizes the Secretary of the Navy, among others, to accept, receive, hold, administer, and expend any gift, devise, or bequest of real or personal property for the benefit of any school, hospital, or other organization under the jurisdiction of the Department of the Navy) to Public Law 513, 80th Congress, (62 Stat. 209, 46 U. S. Code 733) (which authorizes the furnishing of Navy salvage equipment to private salvage companies). Public Law 305, 78th Congress, (58 Stat. 223, 50 U.S. Code App. 1301) requires the transfer of certain vessels requisitioned or purchased from private owners to the Maritime Commission for return to former owners or other disposition. Public Law 204, 78th Congress (57 Stat. 604, 34 U. S. Code 408c-12) requires the return to the Maritime Commission of vessels acquired by the Navy from that Commission without reimbursement. The Act of August 2, 1946 (60 Stat. 855, 34 U. S. Code 915b (c)), authorizes the sale of meals by general messes afloat and ashore; the Act of July 30, 1947 (61 Stat. 675, 34 U. S. Code 553a-c) authorizes the sale of utilities and related services; Public Law 560, 80th Congress, (62 Stat. 276, 43 U. S. Code 315q) authorizes the lease or charter of transportation facilities to private carriers under certain circumstances; and the Act of May 20, 1926, as amended, (44 Stat. 570, 49 U. S. Code 175 (d)) authorizes the sale of fuel and the furnishing of other assistance to aircraft in emergency situations. These statutes are mentioned merely to indicate the wide variety of subjects covered by separate legislation and to illustrate the strong desirability of codifying and bringing together into one comprehensive statute, applicable to each of the Armed Services, as has been done in the

field of procurement," the whole undigested and frequently conflicting mass of property disposal laws that plague and confound the Government lawyer.

SUMMARY

Certain general rules, based on the foregoing discussions may be formulated:

1. Any disposal of Government property which involves the transfer of title and possession from the Government to persons or organizations outside the Government must, in accordance with Article IV, Section 3 of the Constitution, be specifically authorized by Con

gress.

2. Sales of Government property by the

The Armed Services Procurement Act of 1947 (41 U. S. Code 151).

Navy to the public must be conducted on a competitive bid basis.

3. Disposals of property in connection with procurement do not necessarily involve Article IV, Section 3 of the Constitution. The mere reservation, by contract, of title in the Government of property to be acquired by a contractor in the performance of such contract, does not preclude the disposal of such property in accordance with other terms of the contract.

4. Inter-governmental transfers involve the law of appropriations and not disposal of Government property within the inhibition of the Constitution.

5. The authority of the President as Commander-in-Chief to direct the disposal of Government property in the interest of the security and defense of the United States is not limited by Article IV, Section 3, of the Constitution.

INTRODUCTION

It seems appropriate that this final chapter of the Navy Contract Law Course should be devoted to an explanation of the practical operation of Navy procurement. The earlier chapters, with the possible exception of chapter 1, which was principally historical in approach, have dealt at some length with the legal aspects of various phases of Navy procurement and property disposition. At the expense of concluding this course with a purely factual and non-legal chapter, a description of the procurement organization of the Naval Establishment would seem to be as necessary as an understanding of the legal restrictions woven about Navy purchasing. A knowledge of "how it is done" is no less important than "how to do it." The salient characteristic of the Navy's procurement organization is its consciously developed system of checks and balances. No one individual, below the level of the Secretary himself, carries the entire responsibility for the many steps required by the procurement cycle. Thus, the Contracting Officer who makes the contract is not the one who certifies it for payment, that authority residing in the technical inspector who has to certify that the items called for have been received. After certification as to quality and quantity has been made, still another individual, the disbursing officer, makes the payment. This division of responsibility plays a far more important role than solely that of insuring against an improper use of authority; it insures that technically qualified and trained personnel carry the responsibility for that phase of the procurement

* Prepared by Hudson B. Cox, General Counsel, Department of the Navy, in collaboration with other members of the Office of the General Counsel.

cycle for which they are best fitted. Actually the Navy's system of checks and balances is carried far beyond contracting, inspection and disbursing. In a negotiated purchase of any significant size a series of individuals and offices contribute toward safeguarding the Government's interest. The negotiating officer, usually aided by a price analyst and a lawyer, will work out with each of several qualified and potential suppliers the best transaction, contract and price-wise, that he can obtain. That deal which appears to be most advantageous to the Government will be approved by him and submitted to the Office of Naval Material for its approval of the basic terms proposed. This "business clearance" at a departmental level provides a review backed by the experience of past purchases of the same or similar items and a knowledge of, at what prices and from which supplies other purchasing activities of the Navy Department may have been buying similar commodities. If approved by the Office of Naval Material, Counsel for the Bureau making the procurement will prepare or approve the contract, aided materially in that respect by having participated in the negotiations for the purchase. The contract is then reviewed and signed by an authorized Contracting Officer for the Bureau.

The administration of the contract at that point passes to production experts who follow and inspect the work as it progresses: the Inspectors of Naval Material, Inspectors of Ordnance, Supervisors of Shipbuilding, or Bureau of Aeronautics Representatives, as the case may be. If determination of costs of production are germane to the Government's interest, as when the contract calls for reimbursement of the contractor's costs, still another group, the Cost Inspection Service of the Bureau of

Supplies and Accounts, assumes responsibility for the audit and approval of costs of performance. Finally, if the items properly meet the specifications of the contract and are accepted on delivery, upon certification of the technical inspector, and of the cost inspector where necessary, another individual, the disbursing officer, will make payment under the contract. In this manner the Government's interests are carefully safeguarded at every stage of the procurement cycle.

Because of the existence of this system of checks and balances with the opportunity it affords for review, the Navy policy, unlike that of the other Services, is to vest wide discretion and scope for the exercise of judgment in its contracting and negotiating officers. The Navy Procurement Directives for the most part furnish only general policy guides as opposed to the detailed Procurement Regulations of the Army, a difference in policy which has necessitated considerable reconciliation of views in the preparation of the uniform Armed Services Procurement Regulation to which reference is made later in this chapter.

The actual procurement organization of the Department can best be considered in terms of its three main components, contracting, fiscal and legal.

THE PROCUREMENT ORGANIZATION

CONTRACTING

Improvements in the procurement organization of the Navy Department developed rapidly as wartime legislation opened the way for simplified methods of placing contracts. Today, the organization is flexible and could expand quickly to meet any emergency. As always, ultimate procurement authority is in the Secretary and radiates from him down to the Assistant Secretary, the Office of Naval Material, the various Bureaus, the field offices, and the Contracting Officers who actually make the contracts. However, responsibility has been spread along functional lines to prevent bottlenecks and facilitate expansion.

Except for "single-department" procurements and procurements made by "joint procurement agencies," discussed elsewhere in this chapter, the actual act of purchasing for the Navy is performed by the individual Bureaus

and the Field Purchasing Activities. On them falls the responsibility of filling the needs of the Naval Establishment through purchase. Technical and large scale purchases are generally handled by the Bureaus and the principal Field Purchasing Activities. Other shore activities, having a regularly organized supply department, procure some items for the use of the particular local activity of which they are part.

The return to peacetime procurement did not alter significantly the Navy's wartime procurement organization. In broad outline, present organizational lines of responsibility were formalized in August 1945 when the Secretary abolished the Office of Procurement and Material, transferred its functions to the Assistant Secretary, and established the Material Division in the Office of the Assistant Secretary. On March 5, 1948, the Material Division became the Office of Naval Material by virtue of Public Law 432, 80th Congress, (62 Stat. 68, 5 U. S. Code 423), but by administrative delegation the Assistant Secretary continues to be the Secretary's alter ego with respect to procurement matters.

OFFICE OF NAVAL MATERIAL

As the head of this Office, the Chief of Naval Material has a statutory responsibility, under the Secretary of the Navy, to "effectuate policies of procurement, contracting, and production of material throughout the Naval Establishment, and plans therefor...." (Public Law 432, 80th Congress). In practice, however, he is under the direction of the Assistant Secretary and has much broader functions than those outlined in the statute. His office has the responsibility for making policies, coordinating procurement activities, and standardizing procedures in all matters connected with the procurement, production, inspection and control of Navy material. It also performs operational functions common to two or more Bureaus or offices in the Navy, which can be more effectively performed under a single administration, such as the clearance of contracts and inspection of material.

Of the several divisions which comprise this Office (the Production Policy Division, the Field Services Division, the Material Control Policy