Opinion ID: 397836
Heading Depth: 2
Heading Rank: 1

Heading: The Basis for GAO's Request

Text: 18 Merck argues that GAO has no legitimate claim for access to Merck's records because GAO has not alleged any possibility of fraud, corruption, or the need to audit Merck's books. The Comptroller General is not authorized to demand access to contractor records simply to gather data for an industry-wide economic study, Merck claims, and this is said to be the aim of the GAO's demand. 8 In Merck's analysis, the access statutes were only meant to apply in situations where allegations of fraud or illegality suggested that it would be desirable to conduct an audit of a specific contract. But the access demands may not be made merely to let GAO conduct broad-ranging and ill-defined studies of the general adequacy of government procurement procedures. Merck Brief at 53. 19 This contention is not new. 9 A variety of sources are said to show that the access provision was intended solely to provide a method to discover fraudulent activities, 10 or to serve as a deterrent to improper conduct by government procurement officers, 11 or to apply only to situations in which there was reason to suspect fraud or bad faith or illegality. 12 Merck emphasizes repeatedly that Congress had a single and limited purpose, which was to protect the government from fraud and other abuses. Merck Reply Brief at 26; see id. at 4, 14, 28. (O)nly the suspicion of fraud or other improprieties could trigger the access clause, id. at 27, because the debates leave no room for doubt as to the limited anti-fraud purpose of the access statute. Id. at 29. These would be persuasive claims if they were supported by the legislative history. They grossly overstate that history, however, and it is time to dispatch the contention once and for all. 20 It is true that Representative Hardy, sponsor of the access-to-records legislation, 13 explained that his main purpose in introducing the bill was to deter improprieties in the negotiation of Government contracts. 97 Cong.Rec. 13198 (1951). Representative Hardy, however, intended the clause to do far more than combat or deter fraud. He spoke of excessive contract prices, wastefulness in the negotiation of contracts, and the need for every reasonable safeguard against waste and extravagance. Id. These comments convey concerns that go far beyond the limited anti-fraud purpose asserted by Merck. They show that Congress was particularly concerned about the general adequacy of government procurement techniques and not simply illegalities or frauds. Early in his explanation of the benefits of the access legislation, for example, Representative Hardy spelled out precisely the goal of improving procurement methods that Merck rejects: 21 Under conditions as they now exist, competitive bidding has little or no effect upon contracts which are negotiated without advertising. As a result, when a contract is being negotiated, here is a typical illustration of what usually happens: A contractor with years of experience comes to the conference table accompanied by a highly competent accountant and equally competent lawyer. The Government representative on the other side of the table will, in a great majority of cases, be at a tremendous disadvantage, from the standpoint of both training and experience, no matter how conscientious and honest he may be. So, aside from any intentional liberality on the part of the Government contracting officer, there is every chance in the world that the Government will come out on the short end of the deal. This bill would at least enable the agent of the Congress to check the transaction, both from the Government records and the contractors' books. 22 Id. (emphasis added). Representative Hardy obviously sought to improve the governmental procurement system as a whole by equalizing the relationship between more experienced contractors and government representatives, who were otherwise at a tremendous disadvantage, no matter how conscientious and honest they might be. 14 The access-to-records clause, by shedding light where none had been cast before, would reduce the number of times that the United States will come out on the short end of the deal. 23 Other statements also demonstrate the true tenor of congressional concerns. Representative Hardy continued his explanation of the access bill by suggesting two hypothetical situations to which the clause would apply. In the first, a contractor charged the government for a much greater amount of overhead than it asked under a private contract for the same work. (I)t would then obviously be desirable for the General Accounting Office to look behind the rate which had been established. Id. Should GAO find that the rates were excessive, Representative Hardy explained, it would then be able to bring the facts to the attention of contracting authorities. Id. In the second vivid example of how this authority would enable the GAO to do an effective job, Representative Hardy referred to an earlier congressional investigation into government procurement of automobile parts: 24 We found one situation where the Government was buying parts from an automobile dealer who, in turn, was getting them from a parts distributor who, in turn, was getting them from a small tool shop. Naturally, the price paid by the Government included profits upon profits and completely wasteful administrative and handling costs. It would be difficult, if not impossible, for GAO to detect such a situation without the right afforded in this bill. 25 Id. (emphasis added). There is no implication in the statements about either hypothetical that the private contractors had acted fraudulently or illegally. Representative Hardy's access legislation was designed to uncover inefficient procurement methods as well as misfeasance, and Congress expected the access clause to reveal much more than fraud. Moreover, the second example effectively refutes Merck's suggestion that the government must allege or suspect procurement abuses before the access clause can be invoked. Merck Brief at 14, 33. Representative Hardy's example is one in which it would be impossible for GAO to detect waste without the authority to examine contractor records at will. Had Congress intended GAO to use the access clause only when it had suspicions of wrongdoing, Representative Hardy would surely have spoken of the difficulty for GAO to investigate that situation rather than the ability of GAO to detect it. 26 Several exchanges in the debates which followed Representative Hardy's introduction of the access-to-records legislation also indicate that Merck's reading of that legislation is woefully narrow. When Representative Mills suggested how useful the bill might be in investigating potentially fraudulent situations, Representative Hardy responded emphatically: 27 The gentleman is right, with this exception that I think should be clearly understood, that there are a lot of other situations besides those involving fraud which might be uncovered. 28 97 Cong.Rec. 13199 (1951) (emphasis added). Representative Hardy also had the following exchange with Representative Hoffman: 29 Mr. HOFFMAN. The whole thing arises out of the belief ... that the Federal employees who negotiate these contracts are no match for the people on the other end of the deal, those who negotiate for private enterprise. It that not right? That is what gives rise to this? 30 Mr. HARDY. What is the gentleman's question? 31 Mr. HOFFMAN. This bill is based upon the thought that the Federal employees who negotiate these contracts are no match for the people who represented private corporations or individuals? 32 Mr. HARDY. I think that is one factor. 33 Id. at 13377. 34 Congress thus anticipated that the access-to-records legislation would lead to general improvement in the government's procurement system simply because it would equalize the relationship between agents of the United States and private contractors. Not surprisingly, this is also a long-standing interpretation by GAO: 35 The right of access by GAO to records of costs of production is not limited to that necessary to determine whether the contracts were performed in accordance with their terms and whether the contracting officer had been defrauded or misled in entering into the contracts. 36 115 Cong.Rec. 25801 (1969) (GAO memorandum reprinted at request of Senator Proxmire). 15 In the instant case, the Comptroller General has explained that the request for Merck's records is necessary to determine the adequacy of the protection afforded the Government by the negotiating techniques used by the procuring agencies. Memorandum and Order, Aug. 12, 1977, J.A. 509. This purpose is within the scope of his lawful authority, for it puts the access legislation to exactly the sort of use for which Congress intended it.