Proposal to Require Government Contractors to Comply With Wage and Price Guidelines as a Condition of Doing Business With the Government

October 20, 1978

78-58 MEMORANDUM OPINION FOR THE
DIRECTOR, COUNCIL ON WAGE AND PRICE
STABILITY
Federal Property and Administrative Services Act of
1949 (40 U.S.C. § 481)—Government Contracts—
Wage and Price Standards in Government
Procurement

This responds to your request for our opinion on several legal questions
concerning an administration proposal to require the observance of wage and
price guidelines by corporations and individuals as a condition for doing
business with the Federal Government. We believe that the President has the
statutory authority to require Government contractors to comply with wage and
price guidelines as a prerequisite for doing business with the Government. This
view was upheld in AFL-CIO v. Kahn, 48 U.S.L.W. 2005 (D.C. Cir. June 22,
1979), cert, denied, 443 U.S. 915 (July 2, 1979). We also believe that the
Government can require Government contractors to receive from their subcon­
tractors and suppliers certificates that the latter are in compliance with wage
and price guidelines with regard to the products and services involved in
contracts related to the contractors’ Government work.

I. The President’s Power to Establish Procurement Policies
In § 201 of the Federal Property and Administrative Services Act of 1949
(“ 1949 Procurement Act” ), 40 U.S.C. § 481, Congress established that
Government procurement policies must be designed to promote “ economy”
and “ efficiency” in Government procurement. In § 205(a) of the 1949
Procurement Act, 40 U.S.C. on § 486(a), Congress specifically conferred on
the President the power to
. . . prescribe such policies and directives, not inconsistent with the
provisions of this Act, as he shall deem necessary to effectuate the
provisions of said Act, which policies and directives shall govern the
Administrator [General Services] and executive agencies . . . .
As interpreted by the United States Court of Appeals for the Third Circuit,
§ 205(a) grants broad discretion to the President to protect and advance a range
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of governmental interests, including “ the interest of the United States in all
procurement to see that its suppliers are not over the long run increasing its
costs . . . Contractors Association of Eastern Penrtyslvania v. Secretary of
Labor, 442 F. (2d) 159, 170 (3d Cir. 1971), cert, denied, 404 U.S. 854 (1971).
In the Contractors case, the Third Circuit considered and affirmed the
validity of the “ Philadelphia Plan” promulgated pursuant to Executive Order
No. 11246, 3 CFR 406 (1969), 42 U.S.C. § 2000e note. The Third Circuit, as
well as other courts of appeals, have consistently upheld the principle that
§ 205(a) of the 1949 Procurement Act confers on the President the power to
require nondiscrimination provisions in all Government contracts. See, e.g.,
Farkas v. Texas Instrument, Inc., 375 F. (2d) 629 (5th Cir. 1967), cert, denied,
389 U.S. 977 (1967); Southern Illinois Builders Association v. Ogilvie, 327 F.
Supp. 1154 (S.D. 111. 1971), affd, 471 F. (2d) 680 (7th Cir. 1972). Prior
Attorneys General have also opined that Executive Order No. 11246 and its
predecessors were valid exercises of statutory authority. See 42 Op. A.G.
97 (1961) (sustaining validity of Executive Order 10925); 42 Op. A.G.
405 (1969) (sustaining validity of revised “ Philadelphia Plan” ).
In its most recent encounter with a challenge to Executive Order No. 11246,
the United States Court of appeals for the Fifth Circuit observed that decisions
of other courts of appeals had “ candidly acknowledged the validity of the use
by the President or Congress of the procurement process to achieve social and
economic objectives.” United States v. New Orleans Public Services, Inc.,
553 F. (2d) 459, 466-67 (5th Cir. 1977), vacated on other grounds, 436 U.S.
942 (1978).1 We believe that the backdrop formed by New Orleans Public
Service and prior cases interpreting § 205(a) of the 1949 Procurement Act
suggests that in order to assess the general validity of a program requiring
compliance with the wage and price guidelines as a condition for doing
business with the Government, two questions must be considered. First, is such
a program authorized under the 1949 Procurement Act? Second, is such a
program inconsistent with any other statutes?
A. Authority Under the 1949 Procurement Act. We conclude that the 1949
Procurement Act authorizes the proposed requirement of compliance with the
wage and price guidelines. The general purpose of the proposed program—to
lower costs to the Government of the goods and services it purchases— is
clearly consistent with the purposes of the Act. Nor does the program conflict
with any specific provision of the Act.

'In support of this statement, the court cited Roseni Contracting Co. v. Brennan, 508 F. (2d)
1039, 1045 n. 18 (7th Cir. 1975), and Northeast Construction Co. v. Romney, 485 F. (2d) 752,760
(D.C. Cir. 1973).
 B. Inconsistency With Other Statutes. The question whether the program as
devised is inconsistent with other statutes raises more subtle and difficult
problems. In the New Orleans Public Service case discussed above, the Fifth
Circuit accepted the Government’s contention that Executive Order No. 11246
was authorized not only by § 205(a) of the 1949 Procurement Act, but also by
Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the
Equal Employment Opportunity Act of 1972, 86 Stat. 103, which amended
Title VII. The court concluded that the order represented “ a long standing
program which Congress has recognized and approved.” 553 F. (2d) at 467.2
The court’s analysis suggested that the 1949 Procurement Act, standing alone,
did not provide sufficient authority for the order but for the fact that it was
supported by a long history of the use of the procurement process to combat
discrimination against minorities, a use that had been, in effect, ratified by the
Congress.
We are unaware of any statute other than the 1949 Act which might be
viewed as a source of statutory authority for this program. Implicit in the Fifth
Circuit’s opinion and its discussion of Youngstown Sheet & Tube, note 2,
supra, was the assumption that if Congress had passed some other statute which
was inconsistent with the order, then the court may have ruled differently on the
validity of the order.3 It follows that a statute inconsistent with this wage and
price program would be viewed as a limitation on the power conferred by
§ 205(a) of the 1949 Procurement Act.
The lack of other supportive statutory authority to implement this program
does not pose a significant problem, primarily because the program is
demonstrably more closely related to the purposes of the 1949 Procurement Act
than the antidiscrimination programs established by Executive Order No.
11246 and its predecessors. Thus, while courts may have felt obliged in
Executive Order No. 11246 cases to look for additional statutory support for the
antidiscrimination policies embodied in the order, we believe that the 1949
Procurement Act itself provides an ample statement of relevant national policy
and authority—to procure goods and services for the Government in an
economical fashion.
We now turn to the more difficult question, whether the program would
conflict with some other statute. We believe that those aspects of the program
requiring individuals and companies doing business with the Government to

2In a footnote accompanying this conclusion, the court dismissed an argument that Executive
Order No. 11246 constituted executive “ lawmaking” of the type prohibited by the Court’s decision
in Youngstown Sheet & Tube Co. v. Sawyer. 343 U.S. 579 (1952). See 553 F. (2d) at 467-68, n. 8.
3Such an assumption has been adopted in virtually all cases prior to New Orleans Public Service
in which the validity of Executive Order No. 11246 has been challenged and upheld. See, Southern
Illinois Builders Ass'n v. Ogilvie, 327 F. Supp. 1154, 1162 (S.D. III. 1971), a ffd , 471 F. (2d) 680
(7th Cir. 1972), Joyce v . McCrane, 320F. Supp. 1284, 1291 (D. N.J. 1970); Contractors Ass' n of
Eastern Pennsylvania'/. Secretary o f Labor, 442 F. (2d) 159, 171-175 (3d Cir. 1971), cert, denied,
404 U.S. 854 (1971).
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 avoid price increases beyond a specified level may be inconsistent with 50
U.S.C. App. § 645b. That provision reads as follows:
Nothing contained in this Act or any other Federal Act (except the
Emergency Price Control Act of 1942, as amended, the Stabilization
Act of 1942, as amended, or the District of Columbia Emergency
Rent Act, approved December 2, 1941, as amended), shall be
construed to authorize the establishment by any officer or agency of
the Government of maximum prices for any commodity or maximum
rents for any housing accommodations.
The provision would appear to impose on the executive and judicial branches
a rule of statutory construction that would prohibit a finding of implicit, as
opposed to explicit, power in any Federal statute to establish “ maximum
prices” for “ any commodity,” 4 whether the commodity is sold solely within
the private sector or to the Government. Because the setting of a percentage
guideline beyond which a contractor may not increase his prices charged to the
Government would appear as the setting of a “ maximum price,” it could be
argued that § 645b, on its face, bars the President from utilizing the 1949
Procurement Act, or any other statute, to establish and enforce price guidelines
even with regard to those who do business with the Government.
The legislative history of § 645b does not clearly indicate whether the
Congress passing the provision necessarily intended it to condition a subsequently
enacted statute, here § 205(a) of the 1949 Procurement Act. In June of 1946,
President Truman vetoed a bill which would have extended, as amended, the
Emergency Price Control Act of 1942 (EPCA), 56 Stat. 23, because of his view
that the bill was inadequate. Under the 1942 Act, discussed in greater detail
below, the President was empowered to establish maximum prices with regard
to a wide range of goods and services sold within the private sector and to the
Government. In apparent anticipation of the President’s veto, a late amendment
was added by Senator Moore to a bill extending various powers under the
Second War Powers Act, 56 Stat. 176.
Most titles of the Second War Powers Act expired or were repealed by June
30, 1950, but the Moore amendment had no express expiration date and it has
never been repealed. Later in 1946, a law extending the EPCA (but not the
Stabilization Act of 1942) was adopted. That law provided for ceilings on rents
and most prices but added a number of important exceptions.
We believe that the intent of Senator Moore and the Congress in adopting
§ 645b was limited to placing a prohibition on President Truman’s construing
any then existing Federal statutes as conferring on him power to control prices
until such time as he and the Congress resolved their dispute over the extension
of the EPCA. We find nothing inconsistent with this interpretation of § 645b in
the congressional debates on the Moore amendment, 92 Cong. Rec. 7312

■*The meager legislative history of the provision suggests that its reference to prices of “ any
com m odity" was intended to include the full range of goods and services included in the
Emergency Price Control Act of 1942, 56 Stat. 23. See H. Rept. No. 2395, 79th Cong., 2d sess.
(1946); 92 Cong. Rec. 7312, 7872, 7926 (1946).
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(1946). In addition, we are unable to find any evidence that any Congress
subsequent to the Seventy-ninth has viewed § 645b as having continued
vitality.5
With regard to those aspects of the proposed program that require compli­
ance with wage guidelines by employers doing business with the Government,
a potential problem is presented by the Davis-Bacon Act, 40 U.S.C. § 276a,
which generally requires Government contractors to pay minimum levels of
wages to their employees. Should wages in the private sector rise at a greater
rate than that established by the wage guidelines to be issued under this program
by the Council on Wage and Price Stability, it may become necessary for the
President to exercise his authority under 40 U.S.C. § 276a-5, § 6 of the
Davis-Bacon Act, to suspend application of the Act.6 In addition, under Title II
of the National Emergencies Act o f 1972, Pub. L. No. 94-412, a Presidential
declaration of national emergency required in order to suspend Davis-Bacon
would be subject to veto by a concurrent resolution of the Congress. We believe
that the so-called legislative veto device such as that contained in the 1976 Act
is unconstitutional. However, this issue has not yet been resolved by the courts
and, therefore, were Congress to pass such a concurrent resolution, we may
anticipate a suit to be filed attempting to block the suspension.
In considering whether the use of wage and price guidelines to control the
price of goods and services to the Government is inconsistent with statutes
other than the 1949 Procurement Act, we believe it is important to recognize
that there is no history of the use of such guidelines. This is important because
most of the decisions upon which we would rely in litigation—those upholding
Executive Order No. 11246—were decided several decades after President
Roosevelt first implemented an anti-discrimination program in 1941. See
Executive Order No. 8802. When the courts finally came to pass on the validity
of Executive Order No. 11246, the authority to issue that order and its
predecessors was historically well established. In contrast, the history of
mandatory wage and price controls from World War II to the present suggested
a pattern of tight congressional control over both the delegation of power to the
President and over its exercise. Moreover, control of the wages and prices of
Government contractors has always been treated as part of general controls over
the entire economy.
On April 11, 1941, President Roosevelt established the Office of Price
Administration and Civilian Supply. Executive Order No. 8734, 6 Fed. Reg.

5It could not be successfully contended that the 1949 Act implicitly repealed the Moore
amendment given the burden usually imposed on those arguing that a statute has been repealed by
implication. See, Tennessee Valley Authority v. Hill, 437 U.S. 153, 187 (1978).
6The experience of this office with a previous suspension of Davis-Bacon in 1971 suggested
several problems that we may expect to arise should that Act or any one of some 6 1 other similar
statutes identified in 1961 require suspension. First, any suspension should be applied prospectively.
Second, some contractors who deal with the Government may also be subject to State laws similar
to Davis-Bacon. See, e.g., N.Y. Labor Law, Art. 8; Cal. Labor Code §§ 1771 et seq. This office
concluded in 1970 that suspension of Davis-Bacon would have the effect of suspending or pre­
empting any applicable State laws.
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 1917. That agency was empowered to issue formal price schedules, but relied
for enforcement solely on publicity and persuasion. One of the functions
conferred on the agency by § 2(d) of the order was to
Advise and make recommendations to other departments and
agencies . . . in respect to the purchase or acquisition of materials and
commodities by the Government [and] the prices to be paid there­
for . . . .
On July 30, 1941, President Roosevelt transmitted to Congress a message
requesting legislative authority to deal with the impact of inflationary price
rises.7 The President pointed out that one consequence of the inflationary spiral
was the increase in “ [c]osts to the Government.” In asking for the legislation,
the President also stated that, “,[l]ike other defense legislation, it should expire
with the passing of the need, within a limited time after the end of the
emergency.”
The 77th Congress responded by enacting the Emergency Price Control Act
of 1942. Section 1(a) declared two purposes of that Act to be: (1) insuring
“ that defense appropriations are not dissipated by excessive prices” ; and (2)
preventing “ hardships” that would befall “ Federal, State, and local govern­
ment, that would result from abnormal increases in prices.” But Congress did
not grant power to control wages, and in the Senate report on the Act it was
stated that wage controls
. . . could, in no event, be acceptable unless coupled with direct and
specific determination of the salaries of management, the dividends
of stockholders, the interest payments received by bondholders, the
incomes of fanners or merchants of professional persons and of all
others.8
The EPCA also dealt specifically with the regulation of the prices of
agricultural commodities, proscribing any control until those prices exceeded
110 percent of parity or the levels reached during any one of three previous
periods, whichever was highest.
On October 2, 1942, Congress passed the Stabilization Act, 56 Stat. 765,
which gave the President the power to impose ceilings over agricultural prices
and to forbid wage raises that had not been approved by the War Labor Board.
Under § 5(a), the Government was entitled to disregard wage payments ruled to
be illegal for several purposes, including, inter alia, “ compensation under
cost-plus contracts and other governmental transactions.” See, Allen v. Grand
Central Aircraft Co., 347 U.S. 535 (1954).9
In September of 1950, Congress passed the Defense Production Act (DPA),
which granted authority to the President to control prices either selectively

7See H. Doc. No. 332, 77th Cong., 1st sess. (1941).
"See S. Rept. No. 931, 77th Cong., 2d sess. 12 (1942).
9Under the regulations published pursuant to the Stabilization Act, a determination by the
National W ar Labor Board that wage payments were in contravention of that Act was “ conclusive
upon all Executive Departments and agencies . . . for the purpose of determining costs or expenses
under any contract made by or on behalf of the United States." 7 F.R. 8749 (1942).
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within one industry or sector of the economy or across the board.10 If prices
were controlled, then wages would also be required to be controlled. The DPA,
as had the Stabilization Act, contained an explicit provision empowering the
President to determine whether “ any wage, salary, or other compensation” had
been paid in violation of the controls and to “ prescribe the extent” to which
such illegal payments could be “ disregarded by the executive departments and
other governmental agencies” with regard to Government contracts. The
Supreme Court later observed that the “ substance” of these two provisions was
“ inescapably the sam e.." Allen v. Grand Central Aircraft Co., supra, at 546.11
In the Allen case, the Government contractor argued that the regulations
mandating the disallowance of illegal wages in computing the sums owed for
work or goods sold to the Government were not authorized by the DPA. The
Government’s brief discussed in detail the history of administrative sanctions to
enforce the wage provisions of the Stabilization Act12 and noted the degree of
oversight which'Congress had exercised during its existence.13
In 1970, Congress reentered the field of wage and price controls by enacting
another Economic Stabilization Act, 84 Stat. 799, which generally empowered
the President to impose wage and price controls even though President Nixon
had specifically opposed the grant of such authority.14 Nothing in the legislative
history of the 1970 Act suggested that Congress believed that there was any
other statutory authority in the Executive to impose wage and price controls.
In 1971, after the President had used the authority under the 1970 Act to
freeze wages and prices for a 90-day period, Congress considered administra­
tion and other proposals to extend the wage and price control authority beyond
the expiration date of April 30, 1972. As finally enacted, the Stabilization Act
Amendments of 1971 added to the President’s arsenal the power to “ stabilize”
interest rates, corporate dividends and “ similar transfers.” 15
In enacting the 1971 amendments, Congress did much to fill in the details
that had not been addressed by the 1970 Act. This was done as least partially in
reponse to the decision in Amalgamated Meat Cutters & Butchers Workmen v.
Connally, 337 F. Supp. 737 (D.D.C. 1971) (three-judge court), in which a
claim that the 1970 Act constituted an unconstitutional overbroad delegation of
legislative power to the Executive had been rejected. Nothing in the Amalga­
mated case suggested any source of power in the President to impose wage and
price controls other then the 1970 Act, which the Court upheld largely on the
theory that its “ fair and equitable” standard and other statutory details were

l0The DPA, like its predecessors, contained a termination date (June 30, 1951) for wage and
price control authority, an authority subsequently extended, 64 Stat. 822, to April 30. 1953.
"U nder the regulations promulgated pursuant to the DPA the "sanction” against employers who
paid illegal wages to their employees in connection with work performed on Government contracts
was disallowance of the illegal wages paid in computing the money due under the contract or from
the Government. See 16 F. R. 6028, 6029, 7284 (1951).
l2Brief, at 43-58.
n ld „ at 43-49.
'*See H. Rept. No. 1330, 91st Cong., 2d sess. 16 (1970) (minority views).
I3S. Rept. No. 507, 92d Cong., 1st sess. (1971).
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 sufficiently particular when the Act was read in the context of the legislation
discussed above.
Finally in 1974, after the expiration of the 1970 Act, as amended, Congress
enacted legislation establishing the Council on Wage and Price Stability. In
hearings on the legislation, the administration made clear that
. . . we are not requesting the statutory authority to impose mandatory,
wage and price controls or the authority to delay wage and price
increases. The mere existence of such authority has in our opinion an
adverse impact on expectations. The name of the game becomes
“ raise prices and wages now before the Government intervenes.”
Statutory authority to delay wage and price increases would lead to
the belief that the Government was on its way back to mandatory
controls. This could result in anticipatory wage and price increases
that would be highly inflationary.16
As enacted, this legislation contained an explicit provision that nothing in it
- “ authorizes the continuation, imposition, or reimposition of any mandatory
economic controls.” 17
The history recounted above involved wage and price controls applicable to
the entire economy or to specific sectors of the economy. The question of
special efforts to impose wage and price restraint on Government contractors as
part of procurement policy has never been addressed. Successful defense of the
proposed program may well turn on the Government’s ability to show that the
requirement of compliance with wage and price guidelines by those doing
business with the Government does not constitute the kind of regulation of
wages and prices in the general economy which Congress has assumed can be
authorized only through a specific delegation of power to the President, or
perhaps by direct statutory regulation by Congress itself.
The Senate recently adopted, as an amendment to S. 3077, a “ sense of the
Senate” resolution which expressed the view that no statute, including
specifically the 1949 Procurement Act, was intended by prior Congresses to
confer on the President the authority for the program you have proposed. See
124 Cong. Rec. S. 16781-82 (daily ed. Sept. 30. 1978). But the resolution
merely expresses the “ objection” of the Senate to implementation of a program
like the one at issue here. It is not a law and it is not legally binding.
Furthermore, the Supreme Court has indicated that “ the views of a subsequent
Congress form a hazardous basis for inferring the intent of an earlier one.”
United States v. Philadelphia National Bank, 374 U.S. 321, 348-49 (1963),
quoting United States v. Price, 361 U.S. 304, 313 (1960).

'6See, Hearings on Cost o f Living Task Force before the Senate Committee on Banking, Housing,
and Urban Affairs, 93d Cong., 2d sess. 67 (1974).
,7S. Rept. No. 1098, 93d Cong., 2d sess. 3 (1974). That same report had taken the position that
the bill “ would grant no mandatory or standby control authority over the econom y.” Id., at 1.

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 II. Legality of the Options Under Consideration
You asked us to address the following two questions: (1) “ would a directive
by the President that federal agencies not procure from firms which are on the
CWPS list be upheld in court,” and (2) “ would a directive be upheld if it
precluded awards to firms which although in compliance with the standards for
the products which the agency was procuring, was not in compliance for its
other products.”
Under the first type of directive, a contractor is generally barred from doing
business with the Government if its business activities as a whole are found to
be in noncompliance with the wage and price guidelines established by the
Council. Thus, a contractor whose Government-related operations are in
compliance could nevertheless be barred because its overall operations are not
in compliance. Under the second type of directive, a contractor who can
convincingly separate his non-Govemment from his Government operations is
bound to adhere to the wage and price guidelines only with regard to the latter
operations.
We believe that the difference between the two types of directives will
probably have little impact on the validity of the overall program if.the
principles established in the Executive Order No. 11246 cases are applied by
the courts to this program. We conclude this because, under the reasoning of
Rosetti Contracting Co. v. Brennan, 508 F. (2d) 1039, at 1045, n. 18 (1975), a
program will be upheld even if the relationship between prices paid by the
Government and the objectives of the program itself are somewhat “ attenuated.”
See generally, United States v. New Orleans Public Service, Inc., 553 F. (2d),
at 467-68, n. 8 .18
However, the more direct the connection between compliance with wage and
price guidelines and lower costs to the Government, the stronger is your
argument that the program is in furtherance of the purpose of the 1949
Procurement Act to procure goods and services for the Government more
economically and efficiently. Therefore the case with respect to goods and
services supplied to the Government will be stronger than for other products of
a Government contractor.19
Next, you raised a question whether “ a contractual requirement in a prime
contractor’s contract that it require certification of compliance of its subcontrac­
tors and suppliers” would be upheld. A similar provision is contained in § 203
of Executive Order No. 11246. We believe that such a provision would be
upheld along with the basic program; neither provision would place any
enforcement responsibility on the contractor himself.

,8Under this principle, we think a court would probably accept the argument that applying wage
and price guidelines to all phases of a corporation’s business would, over the "long run ," id., at
170, decrease procurement costs to the Government.
19We note that in cases where a contractor cannot satisfactorily segregate his Government and
non-Govemment related operations, debarment of the contractor should be possible under the
second type of directive without implicating the broader reach of the first type of directive.
247
 You also asked whether “ the exclusion from this program of contracts
awarded under formally advertised procedures significantly improves” the
chances that either program would be upheld. Because there is no requirement
that formally advertised contracts be awarded to the lowest bidder, see 41
U.S.C. § 253(b), we believe that the inclusion of such contracts within the
reach of the program should not significantly affect the legality of the program
one way or the other. Again, it may be that the degree to which the total
economy is directly affected by this program would be a factor in judicial
consideration of an argument that the program is in effect a general, mandatory
wage and price system which can be imposed only pursuant to congressional
authorization.
Finally, we address the implicit issue whether debarment is an appropriate
and authorized sanction for violation of wage and price guidelines. Under
analogous case law, e.g., Copper Plumbing & Heating Co. v. Campbell, 290
F. (2d) 368 (D.C. Cir. 1961), as well as those cases upholding Executive Order
No. 11246, we believe that debarment is an appropriate remedy. At the same
time, in at least one case sustaining debarment in the absence of explicit
statutory authority, the court added that debarment cannot occur “ without
either regulations establishing standards and a procedure which are both fair
and uniform or basically fair treatment” of those debarred. Gonzalez v.
Freeman, 334 F. (2d) 570, 580 (D.C. Cir. 1964). This case strongly suggested
that if debarment is utilized as a remedy, scrupulous attention must be given to
insure that the standards for exceptions are clearly established by regulation
and that those standards are applied uniformly.
John M . H arm on
Assistant Attorney General
Office of Legal Counsel

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