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Matched Legal Cases: ['§ 2313', '§ 254', '§ 2313', '§ 254', '§ 53', '§ 60']

Bowsher v. Merck & Co., Inc. - 460 U.S. 824 (1983) :: Justia US Supreme Court Center
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Bowsher v. Merck & Co., Inc. - 460 U.S. 824 (1983)
Case	U.S. Supreme CourtBowsher v. Merck & Co., Inc., 460 U.S. 824 (1983)Bowsher v. Merck & Co., Inc.No. 81-1273Argued December 1, 1982Decided April 19, 1983*460 U.S. 824CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
(a) It is plain from the face of the statutes in question that the words "directly pertinent" are words of limitation designed to restrict the class of records to which access is permitted by requiring some close connection between the type of record sought and the particular contract. The legislative history underscores what the language reflects: Congress' intention to limit to some degree the Comptroller General's access power. The legislative history also reveals that Congress sought, in granting this access authority, to equip the General Accounting Office (GAO), Page 460 U. S. 825 which the Comptroller General heads, with a tool to detect fraud, waste, inefficiency, and extravagance in Government contracting. Given these dual, conflicting congressional aims, in construing the statute, the public interest served by GAO investigations must be balanced against the private interest in freedom from officious governmental intermeddling in the contractor's private business affairs. Pp. 460 U. S. 830-835.
O'CONNOR, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, POWELL, and REHNQUIST, JJ., joined, and in Part V of which WHITE and MARSHALL, JJ., joined. WHITE, J., filed an opinion concurring in part and dissenting in part, in which MARSHALL, J., joined, post, p. 460 U. S. 845. BLACKMUN, J., filed an opinion concurring in part and dissenting in part, in which STEVENS, J., joined,post, p. 460 U. S. 860. Page 460 U. S. 826
In 1973, Merck & Co., Inc. (Merck), entered into three contracts with the Defense Supply Agency of the Department of Defense and one contract with the Veterans' Administration for the sale of pharmaceutical products to the Government. All four contracts were negotiated, rather than awarded after formal advertising. [Footnote 2] The pharmaceutical products supplied Page 460 U. S. 827 under each contract were standard commercial products sold by Merck in substantial quantities to the general public. App. 41a. The price term proposed by Merck for each contract was based on the catalog price at which Merck sold the item to the general public or was otherwise determined by adequate competition. Before the award of each of the contracts at the fixed price proposed by Merck, there was no actual negotiation of price, and the Government contracting officers did not request Merck to submit cost data in connection with any of the four contracts.
As required by 10 U.S.C. § 2313(b) and 65 Stat. 700, 41 U.S.C. § 254(c), [Footnote 3] each contract contained a standard access- Page 460 U. S. 828 to-records clause granting the Comptroller General the right to examine any directly pertinent records involving transactions related to the contract. Relying on these clauses, in August, 1974, the Comptroller General issued a formal demand to Merck for access to the following:
App. 18a. [Footnote 4] Page 460 U. S. 829 Merck refused to comply with the Comptroller General's request, and commenced this action in the United States District Court for the District of Columbia, seeking a declaratory judgment that the Comptroller General's access demand exceeded his statutory authority. [Footnote 5] The United States intervened and counterclaimed to enforce the Comptroller General's demand.
"directly pertaining to the pricing and cost of producing the items furnished by . . . Merck under the . . . contracts . . . including manufacturing costs (including raw and packaging materials, labor and fringe benefits, quality control and supervision), manufacturing overhead (including plant administration, production planning, warehousing, utilities and security), royalty expenses, Page 460 U. S. 830 and delivery costs."
As with any issue of statutory construction, [Footnote 6] we "must begin with the language of the statute itself.'" Bread Political Action Committee v. FEC, 455 U. S. 577, 455 U. S. 580 (1982), quoting 448 U. S. v. Rohm & Haas Co., 448 U. S. 176, Page 460 U. S. 831 448 U. S. 187 (1980). The focal point of controversy is the meaning of the statutory phrase "directly pertain to and involve transactions relating to the contract." See n 3, supra. It is plain from the face of the provisions that these are words of limitation designed to restrict the class of records to which access is permitted by requiring some close connection between the type of records sought and the particular contract. [Footnote 7]
The legislative history of the access provisions underscores what the language reflects: the intention of Congress to limit to some degree the Comptroller General's access powers. As originally introduced, the bill now codified as 10 U.S.C. § 2313(b) and 41 U.S.C. § 254(c) provided access to "pertinent" records "involving transactions related to" the contract. See 97 Cong.Rec. 13371 (1951). [Footnote 8] Representative Page 460 U. S. 832 Hoffman opposed the original bill on the ground that it permitted "unnecessary snooping expeditions" and allowed the GAO to "go into everybody's business and look it over if they just wanted to take a look at it." Id. at 13373. He therefore offered a floor amendment to insert the word "directly" before the word "pertinent," stating that the purpose of the amendment "is to limit the snooping' that may be carried on under this bill." Id. at 13377. The sponsor of the original bill, Representative Hardy, did not oppose the amendment, and the amendment passed without debate or discussion.
The passage of the Hoffman amendment clearly reveals that Congress did not want unrestricted "snooping" by the Comptroller General into the business records of a private contractor. The Government nevertheless attempts to discount the significance of Congress' addition of the word "directly." Based on the lack of opposition to the limiting amendment by the bill's sponsor and the lack of debate, the Government argues that the Hoffman modification did not significantly alter the scope of the Hardy bill. We cannot agree. The only explanation in the legislative history of the meaning and purpose of the amendment is that of Representative Hoffman. His statement, which, as the explanation of the sponsor of the language, is an "authoritative guide to the statute's construction," North Haven Board of Education v. Page 460 U. S. 833 Bell, 456 U. S. 512, 456 U. S. 527 (1982), expressly indicates that the intent of the amendment was to curtail the scope of investigation authorized under the bill. Although, as the Government emphasizes, Representative Hoffman did not have the votes to defeat the bill in its entirety, he nevertheless had the votes to circumscribe the inquiry that the Comptroller General was authorized to undertake. Moreover, to accept the Government's contention that the amendment had no substantive effect would contradict the settled principle of statutory construction that we must give effect, if possible, to every word of the statute. Fidelity Federal Savings & Loan Assn. v. De la Cuesta, 458 U. S. 141, 458 U. S. 163 (1982). Therefore, in our attempt to give meaning to the words "directly pertinent," we must be mindful of Congress' aim to protect contractors from broad-ranging governmental intrusion into their private business affairs.
97 Cong.Rec. 13198 (1951). With regard to the former purpose, it is clear that Congress envisioned use of the access authority as an adjunct to the Comptroller General's statutory responsibility to "investigate . . . all matters relating to the receipt, disbursement, and application of public funds" and to "make recommendations looking to greater economy or efficiency in public Page 460 U. S. 834 expenditures." 31 U.S.C. § 53(a). See also 31 U.S.C. §§ 60, 65(a). [Footnote 9] Obviously, broad access to cost records would enhance the GAO's ability to evaluate the reasonableness of the price charged the Government and to identify areas of waste and inefficiency in procurement.
Because of the lack of debate or discussion of the Hoffman amendment, however, we do not have any indication in the legislative history, nor indeed in the language of the statute itself, of the scope of access authority left to the GAO after the restrictive words were added to the bill. In defining the degree of limitation, we thus traverse uncharted seas, guided only by the two general statutory purposes reflected in the legislative history. Consequently, our task in construing the statutes as they apply in this action is to give effect to both of these congressional aims. The tension between these goals is apparent. For some industries and some types of contracts, including perhaps those at issue here, neither objective Page 460 U. S. 835 can be achieved fully without sacrificing the other. [Footnote 10] Given these dual, conflicting aims, we must balance the public interest served by full GAO investigations against the private interest in freedom from officious governmental intermeddling in the contractor's private business affairs. Page 460 U. S. 836
We cannot accept this interpretation of the statute, however, for it completely eviscerates the congressional goal of protecting the privacy of the contractor's business records. Under the Government's proposed definition, records of expenditures to purchase raw materials for the manufacture of an entirely different product than that sold under the Government contract or to invest in the stock of another corporation would be subject to inspection by the Comptroller General. Hence, the Government's interpretation would permit far-ranging governmental scrutiny of a contractor's business records of nongovernmental transactions completely unrelated to either the contract underlying the access demand or the product procured under that contract. Indeed, carried to its logical extreme, the argument would dictate that few, if any, of a private contractor's business records would be immune from GAO scrutiny. In short, the Government's proposed definition of the statutory language admits of no doctrinal limitation, effectively reading the Hoffman limiting language and its "anti-snooping" policy out of the statute. Page 460 U. S. 837
Moreover, to characterize the GAO's current sweeping view of its access authority as "consistent" would be generous. There is significant evidence indicating that, in the past, the GAO itself has acknowledged a deficiency in its statutory authority to examine indirect cost records. [Footnote 12] For example, Page 460 U. S. 838 in a ruling of particular significance for the facts of this case, the Comptroller General determined in 1967 that the access provisions do not confer upon the GAO the right to examine records relating to a contractor's nongovernmental business, even when such review is necessary to determine whether a catalog-priced item was actually sold in substantial quantities to the general public. App. 162a-163a. Moreover, in late 1969, the GAO prepared a memorandum for Congress in connection with congressional consideration of a proposed grant of additional access authority to the GAO to pursue a study of contractor profits in the defense industry. In the memorandum, the GAO informed Congress that its authority under the 1951 access provisions did not extend to review of records of a contractor's nongovernmental business, and that additional access authority was therefore necessary to conduct a profit study. 115 Cong.Rec. 25800-25801 (1969) (reprinting GAO Memorandum on the Adequacy of the Legal Authority of the Comptroller General to Conduct a Comprehensive Study of Profitability in Defense Contracting). Finally, a 1970 internal memorandum also reveals the GAO's belief that amendment of the 1951 access statutes would be necessary to give it the power to examine records of indirect costs. App. 160a-161a. [Footnote 13]
The only statements by the GAO directly supportive of its position here occur in testimony before a congressional Subcommittee Page 460 U. S. 839 in 1963 regarding the GAO's litigation of the scope of its access authority in Hewlett-Packard Co. v. United States, 385 F.2d 1013 (CA9 1967), cert. denied, 390 U.S. 988 (1968). [Footnote 14] In light of the GAO's litigation posture during these hearings, as well as the contrary expressions of GAO opinion noted above, this testimony cannot provide persuasive evidence of the GAO's consistent interpretation or practice.
To summarize, the Government has failed to offer a definition of "directly pertinent" that would give any effect to the limiting purpose of that language. In our view, the appropriate accommodation of the competing goals reflected in the legislative history counsels us to draw the line precisely Page 460 U. S. 840 where both lower courts have drawn it. Thus, under the four fixed-price contracts in question, the Comptroller General should be permitted access to records of direct costs. [Footnote 15] He should be barred, however, from inspecting records of costs incurred in the areas of research and development, marketing and promotion, distribution, and administration, except to the extent the contractor has allocated these costs as attributable to the particular contract. [Footnote 16]
Direct costs certainly pertain directly to even a fixed-price contract, for direct costs are, by definition, readily identifiable as attributable to the specific product supplied under the contract. Consequently, as a rational businessman, the contractor will have some regard for these costs in setting even a catalog price in order to avoid a loss on the product. Because these costs therefore have a very direct influence on the price charged the Government, the GAO would need to Page 460 U. S. 841 examine records of these costs to determine whether the contractor is making an excessively high profit or the Government is getting a "fair deal" under the contract. Presumably, indirect costs also influence in some manner the setting of a catalog price, although to what extent is unclear, given the somewhat arbitrary accounting allocations that must be made to determine what portion of indirect costs may be attributed to a specific product. Nevertheless, the degree of intrusion into the contractor's private business affairs occasioned by GAO scrutiny of indirect cost records is far greater, particularly where pure fixed-price contracts are involved. Such an inspection would entail exposure to the GAO of many of the contractor's nongovernmental transactions. [Footnote 17] We therefore conclude that the appropriate balance of public and private interests in this situation weighs in favor of access to direct cost records, but against access to Merck's indirect cost records. [Footnote 18] Our decision in this regard is Page 460 U. S. 842 in accord with that of the majority of the Courts of Appeals to have considered this issue. [Footnote 19]
As we have already noted, however, in adopting the Hoffman amendment, Congress was apparently willing to forgo the benefits that might be gained from permitting the GAO broad access to the contractor's business records in order to protect those contractors from far-reaching governmental scrutiny of their nongovernmental affairs. By inclusion of that language, Congress injected into the determination of which records are accessible considerations besides the Government's Page 460 U. S. 843 need for the information. Thus, any impediment that our holding places in the path of the GAO's