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Receipt is acknowledged of your letter (P-CE) dated the 8th instant, making reference to a purchase of gasoline for use in connection with Railway Mail Service at Columbus, Ohio, for the March quarter, 1934. However, since your letter discusses the particulars of the contract covering motor vehicle service requirements during that period, we are assuming the information you request is in that connection.

The question of the effective date of such contract, when not approved prior to the beginning of the quarter, is a question which has never been definitely and officially decided. It has been the policy of this Bureau to approve such contracts prior to the beginning of the quarterly period insofar as practical; and where it has not been practical to approve such agreements prior to the beginning of the quarter, we have, as a general rule approved the awards as of the beginning of the quarterly contract period.

Theoretically, of course, the agreement, having been made subject to the approval of the Department, is not binding as an enforceable contract until approved by the Department. However, the postmaster is required under the provisions of section 3709 of the Revised Statutes to make the award to the lowest bidder as to price, and section 3709 of the Revised Statutes does not authorize this Bureau to withhold approval of the postmaster's award where the award was, in fact, made to the lowest bidder as to price.

In the instant case, it appears that bids were not opened at Columbus, Ohio, until 10 a.m., January 17 last. From the information submitted, it is patent that the Checker Oil Company was the low bidder as to price and under the provisions of section 3709 of the Revised Statutes the postmaster was obligated to make a tentative award to that concern at that time.

Having no advice to the contrary, when approval of the award was up for consideration by this Bureau, we assumed that the postmaster had proceeded in accordance with statutory requirements and made a tentative award to the lowest bidder.

At the time our approval of award was issued on February 2 last, this Bureau had no knowledge of any emergency arrangements having been made by the postmaster. He naturally assumed that any emergency purchases which might be necessary would be made from the low bidder to whom a tentative award should have been made on January 17 last.

The first vouchers to reach this Bureau which contained information of the emergency purchases and arrangements with the Miller Oil Company did not reach this Bureau until February 8, six days after the approval of an award to the Checker Oil Company.

In this case, as well as in many others, our approval of an award is made retroactive to the time that the low bid was ascertained because it is our judgment that the obligation of the postmaster applies at the time the low bid is ascertained.

With respect to the furnishing of storage space for Governmentowned trucks, it appears that under date of February 14, 1934, the postmaster at Missoula, Mont., advertised for bids to be opened February 17, 1934, for furnishing storage space for five Governmentowned trucks on a monthly basis until June 30, 1934, and McBride & Jones submitted a bid of $3.75 per truck per month which was accepted February 17 by the postmaster who made the following notation on the bid:

This the proposal of McBride & Jones, being lowest of two bids received, is recommended for acceptance at the above specified price; to be effective March 1, 1934, and submits it to the Post Office Department for approval.

There was in existence at the time the above proposals were solicited a contract for storage of the five trucks at $5 per month per truck. The Post Office Department advised the postmaster of the approval of the contract by letter dated February 28, 1934, certifying a change in allowance for the service from $5 to $3.75 per month per truck, effective April 1, 1934. The postmaster made

payment for the month of March at $5 per month under the old contract claiming credit therefor in his accounts for the quarter ending March 31, 1934. In letter from the Post Office Department Division of this office dated July 3, 1934, addressed to the Fourth Assistant Postmaster General, information was requested as to the reasons for not certifying the decreased allowance as of the effective date of the new agreement, and in reply thereto, in letter of July 10, 1934, it was stated that:

In answer to your letter of the 3d instant, initials P-CE, relative to the truck storage contract at Missoula, Mont., for the fiscal year ended June 30, 1934, I wish to invite your attention to the enclosed copy of our letter of February 28, 1934, to the postmaster approving the acceptance of the proposal of McBride and Jones at the rate of $3.75 per truck per month, effective April 1, 1934.

All proposals covering truck storage are subject to the approval of this bureau. However, in this particular instance the postmaster's recommendation and bids were not received at this bureau until February 20. 1934, and, on account of the large number of similar cases awaiting attention, formal acceptance was not authorized until February 28, 1934, and was apparently too late to change quarters on March 1st. Our authorization specified that in the event the change in quarters had already been made the Department should be notified accordingly, it being thought that the postmaster might have assumed that the Department would accept the low bid. It appears, however, that the postmaster awaited official approval before changing quarters, which was received too late to take advantage of the reduced rate effective March 1, 1934.

In view of the circumstances it is hoped that your office may find it possible to restore the amount held in suspension.

Ordinarily a proposal and acceptance by an officer authorized to contract in the Post Office Department or Postal Service constitutes. a contract binding on both parties thereto. United States v. Purcell Envelope Co., 249 U.S. 313; compare United States v. New York and Porto Rico Steamship Co., 239 U.S. 88. Both of these contracts consist of a proposal and acceptance by the respective postmasters on standard form no. 33, standard Government short form of contract for supplies, and there is contained in neither form a provision to the effect that the contract should not become binding unless and until approved by the Postmaster General or other officer of the Post Office Department. Attention is invited to the opinion of the Supreme Court of the United States in Monroe v. United States, 184 U.S. 524, where the advertised specifications and the contract provided that "this contract shall be subject to the approval of the Chief of Engineers, United States Army", and the court stated that:

The approval, therefore, did not consist of something precedent, but was to consist of something subsequent. That which preceded was inducement only, and contemplated an instrument of binding and remedial form, and hence to contain covenants imposing obligations and giving rights and remedies, containing provisions of the time of performance and the manner of it; provisions for changes and for extra work-indeed, of the provisions which prudence and necessity require and those which the statutes of the United States might require. And the final right to see that this was done, the parties agreed, should be devolved on the Chief of Engineers, and it was not satisfied by prior instructions. In other words, a final reviewing and approving judgment was given to the Chief of Engineers, and was given by a covenant so expressed as to constitute a condition precedent to the taking effect of the contract. If the covenant did not mean that, it was idle. Construed as prospective, it had a natural purpose. The engagement of the parties did

not end with the bid and its acceptance. The performance of the work was to be secured, and the final judgment of what was necessary for that, as we have already said, was to be given by the Chief of Engineers.

It was stated in Darragh v. United States, 33 Ct. Cls. 377, that the contract in that case which likewise stated that it was subject to approval of a superior officer, the Quartermaster General, was not a condition of defeasance "but a condition precedent to the legal effect of the agreement" and that the "alleged agreement had no vitality as a contract until approved by the Quartermaster General; and as is said in effect in the Filor case (9 Wall. 45), so far as the legal liability of the Government is concerned it was a nullity."

In view of the conclusions reached by the courts in the cases referred to and other cases where the approval of a superior officer is required, it cannot be concluded that a contract has any binding effect until approved and that the approval is prospective and not retrospective in operation. Where contracts of postmasters for supplies, etc., are to be made subject to the approval of some specified officer of the Post Office Department, the advertised specifications and the contract should specifically so provide, and in such cases postmasters should issue the advertisements to secure bids and tentatively accept the lowest responsible bid and forward the papers to the Post Office Department so that approval may be given prior to the dates when performance should begin under the contracts.

Where, however, the advertisement and the contract do not show that the contract is to be subject to approval it becomes a legal obligation as to both parties immediately upon acceptance by the postmaster and is effective from that date unless specifically provided therein that it shall be effective from a later date.

The payments hereinbefore mentioned will not be further questioned, if otherwise correct, but hereafter the procedure in the matter of such contracts should be in accordance with the rules herein stated. The accounts will be adjusted acordingly.

(A-57221)

RAILROAD RETIREMENT BOARD-TRAVELING EXPENSES

APPOINTMENTS-COMPENSATION-RETIREMENT

With the exception that there may be reimbursement on an actual expense
basis for subsistence, members of the Railroad Retirement Board, created
by the act of June 27, 1934, 48 Stat. 1283, are subject to the provisions of
the Standardized Government Travel Regulations.
Employees of the Railroad Retirement Board are entitled to traveling expenses
under the provisions of section 9 (b) of the act of June 27, 1934, 48 Stat.
1287, only in accordance with the provisions of the Subsistence Expense
Act of 1926, as amended by the Economy Act, and the Standardized Gov-
ernment Travel Regulations issued pursuant thereto.
The appointment or employment of, and the rates of compensation paid to, the
employees of the Railroad Retirement Board under the terms of the act of
June 27, 1934, 48 Stat. 1283, are subject to the Civil Service Laws and
Regulations, the Classification Act of 1923, as amended, and the applicable

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provisions of the Economy Act. Initial appointments of personnel made by the Board will not require Presidential approval under section 203 of the Economy Act.

As the act of June 27, 1934, 48 Stat. 1283, specifically subjects the members and employees of the Railroad Retirement Board to the retirement system therein established for railroad employees, said members and employees are not required to contribute to the Civil Service Disability and Retirement Fund under the terms of the Civil Retirement Act. Under section 5 of the act of June 27, 1934, 48 Stat. 1285, requiring railroad employees and the carriers to make contributions into the railroad retirement fund for the cost of operating the railroad retirement system, there should be included by the Railroad Retirement Board, as an element in determining the contribution percentage, under the heading of administrative expenses, the carrier contribution for members and employees of the Railroad Retirement Board who are made subject to the railroad retirement system, as well as the compensation and expenses of such members and employees. The compensation of both members and employees of the Railroad Retirement Board, created by the act of June 27, 1934, 48 Stat. 1283, is subject to the percentage reduction applicable to Federal personnel under the provisions of the Economy Act, as amended.

The Railroad Retirement Fund is established under the act of June 27, 1934, 48 Stat. 1283, and all payments therefrom are subject to audit by the General Accounting Office.

All expenditures made from the Railroad Retirement Fund under authority of the act of June 27, 1934, 48 Stat. 1283, may be made only when approved by the Railroad Retirement Board. The approval of the Board may be shown on the vouchers by the signature of any member or employee of the Board duly designated and authorized to perform such function with the words "By order of the Board." The Board should designate who may approve vouchers, etc., in the absence of the one who is designated primarily to perform such duty.

Comptroller General McCarl to the Chairman, Railroad Retirement Board, August 29, 1934:

There has been received your letter of August 15, 1934, as follows: The Railroad Retirement Act (Public No. 485, 73d Congress) approved by the President June 27, 1934, establishes the Railroad Retirement Board. Section 9 (a) reads, in part, as follows:

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as an independent agency in the executive branch of the GovernEach of said members shall receive a salary of $10,000 per year, together with necessary traveling expenses, or per diem allowance in lieu thereof, while away from the principal office of the Board on duties required by this act."

Also section 9 (a):

"The members and employees of the Board shall be included as employees under this act and together with employees receiving annuities shall be furnished free transportation in the same manner as such transportation is furnished to employees."

Section 9 (b):

"The Board shall

* employ such persons and provide for their compensation and expenses, as may be necessary to the proper discharge of its functions."

Furthermore, section 5:

"Each employee shall pay an employee contribution in a percentage upon his compensation. Each carrier shall pay a carrier contribution equal to twice the contributions of each employee of such carrier * * *. The contribution percentage shall be determined by the Board from time to time * * *. Until the Board shall determine on a different percentage the employee contribution percentage shall be 2 per centum."

Your decision is respectfully requested regarding the following questions: 1. Does the establishment of the Board "as an independent agency in the executive branch of the Government" subject its members to the provisions of the Standardized Government Travel Regulations, as revised, in the payment of “necessary traveling expenses or per diem allowance in lieu thereof?"

2. Does the term 66 expenses as included in that portion of sec. 9 (b) quoted above, authorize the payment of "traveling expenses" to employees

of the Board, and if it does, are they to be governed by the same rules as apply to members of the Board?

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3. As the Board is authorized to (sec. 9 (b)) "employ such persons as may be necessary do the provisions of sec. 203, part II, of Economy Act of 1933 (Public, No. 212, 72d Congress), as continued and modified by sec. 24 (a) of the Independent Offices Appropriation Act, 1935 (Public, No. 141, 73d Congress), apply to appointments to the staff, or may appointments be made without Presidential authority?

4. As members of the staff are "employees ", as defined in sec. 1 (b) of the act, will they be subject to the civil service, and as such be required to contribute to both the civil-service and railroad-retirement funds?

5. Does the Railroad Retirement Board make carrier contributions for its employees? If not, who makes such contributions?

6. Will salaries payable to employees from the railroad retirement fund be subject to the 5-percent reduction required under sec. 3 of Public, No. 2, 73d Congress, as amended by sec. 21, subsec. (a) (2), Independent Offices Appropriation Act, 1935 (Public, No. 141, 73d Congress)?

In view of the fact that the salary expense of the Board will constitute no burden on the Public Treasury, we doubt that the deduction will serve any useful purpose.

7. The same question is asked regarding members of the Board, and your attention is invited to the fact that the salaries of the members of the Board were fixed subsequently to the enactment of the Independent Offices Appropriation Act, 1935, and constitute no burden on the Public Treasury.

In this connection, we call your attention to your letter no. A-49565, dated June 20, 1933, addressed to the Federal Coordinator of Transportation, wherein you state that at the date of the approval of the act creating the office of Federal Coordinator of Transportation,

"There was no existing law, schedule, Executive order or departmental order by which the compensation of such employees could be determined. Accordingly, there is no basic compensation upon which to apply the percentage reduction established by the Executive order established under section 3, title II, of the act of March 20, 1933."

We respectfully submit that the reasoning of this letter would apply to the question as to whether deductions be made from salaries of the Railroad Retirement Board.

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8. In sec. 9 (b) of the act," the Board is empowered to maintain offices, provide necessary equipment," etc., but no provision is made for the approval of vouchers covering the expenditure of funds. As the Congress has in sec. 8 appropriated such sums not in excess of the amounts in said funds as may be necessary to pay all annuities, other disbursements and expenses of administration of this act," it would seem that it was its intention that the fund should be considered as a trust fund similar in character to that of the Federal Coordinator of Transportation, and so subject to audit by the General Accounting Office, and to the same rules and regulations as other Government funds. If such is the case, should expenditures be approved by the chairman of the Board, or by some one designated by him toapprove “by direction of the chairman", or will it be necessary to have a majority of the Board approve all expenditures?

9. If you decide that the law is not clear regarding the approval of vouchers, can the Board designate one of its members or some other responsible person to approve expenditures, and if so, must the Board name some one to serve during the absence of the first named, or can that person designate a substitute or deputy?

Unless expressly exempted by statute all Federal officers and employees are subject to the terms and conditions of the Subsistence Expense Act of 1926 and the Standardized Government Travel Regulations issued thereunder. The terms of section 9 (a) of the act of June 27, 1934, supra, are such as to authorize reimbursement to members of the Railroad Retirement Board for necessary travel expenses, that is, subsistence while in a travel status away from headquarters or official station, either on an actual expense basis or in the form of a per diem in lieu of subsistence, whereas, the Sub

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