contain a public liability insurance requirement. Such insurance, except for applicable state law, is within the discretion of the individual contractors. In the absence of insurance, or beyond the insurance carried, the contractor is in effect a self-insurer.

The contemplated administrative action gives rise to the question of the authority of the Post Office Department to require public liability insurance of its star route contractors since it reasonably may be assumed that the Postal Service will directly or indirectly have to bear the cost of the insurance. Doubt in the matter is stated to stem from a decision of January 12, 1956, 35 Comp. Gen. 393, wherein it was held that the use of appropriated funds for the purchase of insurance covering a risk assumed by the Government was not in keeping with the established policy of the United States to assume its own risks. But the insurance herein contemplated it not to cover a risk or liability of the Government. The Post Office Department is of the view the Federal Tort Claims Act (28 U.S.C. 2671-2680) does not authorize an action against the Government because of the negligent or wrongful act of a star route contractor-his status not being that of "an employee of the Government" within the meaning of the act. Cf. State of Maryland, for use of Pumphrey v. Manor Real Estate & Trust Co., et al., 176 F. 2d 414. Thus the contemplated public liability insurance would cover a risk, not of the Government, but of the contractor, and involve an ordinary business expense usually reflected in the contract price. We therefore do not view the decision of January 12, 1956, as applicable to such insurance.

The propriety of including a public liability insurance requirement in construction contracts was considered in a decision of September 30, 1938, 18 Comp. Gen. 285, to which you refer. It was stated therein:

While the matter is not wholly free from doubt, the view would appear warranted that the proposed stipulations requiring contractors to furnish public liability insurance against injuries to members of the public from accidents which may arise from operations performed under the contract *** would come fairly within administrative discretion. These matters are not covered by legislation, but relate directly to the conditions for performance of the work which are generally left to administrative control. They are measures such as responsible contractors observe and charge to overhead expenses as a matter of An express contractual stipulation requiring their observance does no more than to require other contractors to meet usual standards of responsibility. While conceivably such stipulations might in some instances increase the contract price over what otherwise might be bid by an irresponsible contractor, any such increase may be viewed as reasonably necessary to the performance in a responsible manner of contract work to accomplish the purposes of the appropriation. This follows the principle of decision of February 9, 1937, 16 Comp. Gen. 748, relating to employee's compensation insurance and employer's general liability insurance, and you are informed accordingly that this office would not be required to object to the inclusion of the proposed stipulations in this respect if administratively determined to be reasonably necessary to the objects of the appropriation.

What was stated in that decision with regard to a requirement of public liability insurance in construction contracts appears equally

applicable to a like requirement in star route contracts; and in consonance with that decision you are advised we consider the inclusion of a public liability insurance requirement in star route contracts to be a matter within the discretionary authority of the Post Office Department.

With the adoption of a public liability insurance requirement the Post Office Department is considering some form of self-insurance in lieu of commercial insurance. Your letter points out that Interstate Commerce Commission regulations (49 CFR, Part 174) require motor carriers subject to its jurisdiction to carry public liability insurance in stated amounts, but permit self-insurance plans in lieu thereof (49 CFR 174.5(a)).

You are advised we would have no objection to providing for selfinsurance in lieu of commercial insurance, the matter being within the purview of administrative discretion.

The final problem discussed in your letter is that of the timing of any imposition of an insurance requirement. Your letter states:

*** In the case of new contracts, the advertisement would, of course, provide for it. However, contracts which are renewed present a problem. We assume that we could make the appropriate insurance coverage a condition precedent to renewal at the end of the term. Further, we assume that if the contractor obtained additional insurance before renewal to meet the Department's requirements that an adjustment of compensation would be permissible under Public Law 669, 80th Congress (amending 39 U.S.C. 434). *

Viewing Public Law 669 in the light of its objectives, to afford star-route contractors the benefits of contract renewal and compensation adjustment, we concur in the two assumptions you have made. However, we suggest for your consideration that the amount of insurance, except perhaps as to minimum amounts, not be administratively prescribed. Also, we suggest for your consideration the desirability of including in the contract insurance provision a disclaimer of liability on the part of the Government for injury or damage to any person or property occasioned by action of the contractor in the performance of the contract. In connection therewith your attention is invited to item 17 of General Services Administration specifications, dated December 30, 1959, for the movement of silver and minor coin, which is as follows:

DAMAGE AND INJURY: The Contractor assumes responsibility for all damage or injury to persons or property occasioned through the use and operation of its vehicles, by, or the action of, the Contractor, its employees and agents, and the Contractor, at its own expense, shall maintain adequate public liability and property damage insurance during the continuance of this Contract, insuring itself against all claims for injury or damage; also Workmen's Compensation, and other legally required insurance with respect to its own employees and agents. The Government shall in no event be liable or responsible for damage or injury to any person or property occasioned through the use or operation of any vehicle by, or the action of, the Contractor, its employees and agents, in performing under this Contract.

[B-142869]

Bids-Insufficient Bid Deposit-Only Bid-Interest of Government Consideration

Where the only acceptable bid for an oil and gas lease is accompanied by an insufficient bid deposit, acceptance would not be discriminatory to other bidders and would bind the bidder, regardless of whether or not there was an offer to correct the deficiency, so that the only factor for consideration is the interest of the Government; therefore, if it is administratively determined that acceptance of the bid will best serve the interest of the Government, the security defect may be waived and the prior rejection of the bid regarded as erroneous.

To the Secretary of the Interior, May 27, 1960:

We refer to a letter of May 10, 1960, with enclosures, signed by the Administrative Assistant Secretary, requesting our opinion as to the acceptability of bids submitted by the British-American Oil Producing Company for oil and gas leases on tracts LA-575 and LA-577 submitted in response to an invitation for bids issued pursuant to section 8 of the Outer Continental Shelf Lands Act, 67 Stat. 462, 43 U.S.C. 1337 (a), advertised at 24 Fed. Reg. 10411.

The invitation or notice of sale was dated December 16, 1959, and required that "A separate bid, in a separate sealed envelope, must be submitted for each tract." It also required that there be submitted with each bid one-fifth of the amount of the bid in cash, cashier's check, bank draft or similar type of negotiable instrument. The requirements of the notice of sale referred to above are consistent with requirements imposed by regulation (43 C.F.R. 201.22).

The British-American Oil Producing Company submitted bids on four tracts: LA-575, LA-577, LA-578, and LA-590. The bonuses offered by the company for each tract were $265,000, $265,500, $2,620,000, and $755,500, respectively. The bids for the last two items submitted by British-American were correct in every respect but were rejected because higher acceptable bids were received. The BritishAmerican bids were the only acceptable bids submitted for the first two tracts but in each case the bid deposit submitted was less than the 20 percent required. The deposit offered with the bid for tract LA-575 was $51,100 or $1,900 less than the 20 percent required; that accompanying the bid on tract LA-577 was also $51,100 or $2,000 less than the amount required. It is noted in the letter of May 10 that in each instance the British-American bid was acceptable and proper in every other respect and indeed was the only acceptable bid received for each of the two tracts.

British-American offered cashier's checks to cover the deficiencies in deposits promptly after such deficiencies were brought to their at

tention but the tender was refused, apparently on the basis of our decision at 38 Comp. Gen. 532, holding that bid deposit requirements in invitations for bids should be enforced in accordance with their tenor. Following receipt of the formal notification of the decision to reject the two bids in question, British-American tendered cashier's checks in the full amount of the bonus bids on the two tracts and we are advised that those checks are being held by the Bureau of Land Management, the leasing agency, pending our determination with respect to the acceptability of the British-American bids on tracts LA-575 and LA-577.

The primary purpose of a bid bond or security deposit is to protect the Government against irresponsible or improvident bidders. The basic objectives of the requirement for rejection of a bid submitted without the exact security required by the invitation are to avoid any possibility of discrimination between bidders, to prevent the possibility of attempts by bidders to leave themselves an option to correct the defective securities, and to eliminate the administrative burden of determining and evaluating the facts involved in excuses alleged by nonconforming bidders. Where, as in this instance, there is no other acceptable bid, there is no question of discrimination; if it is in the interest of the Government to waive the deficiency, the acceptance of the bid will bind the bidder whether or not he offers to correct the deficiency of security; and the reasons for the deficiency are of no materiality. The interest of the Government is the only factor left for consideration, and if it be administratively considered that acceptance of the bid will best serve that interest the defect in the security offered may properly be waived.

In the circumstances, we are of the view that the bids of BritishAmerican on tracts LA-575 and LA-577 should not have been rejected because of the deficiencies in the bid deposits and that the rejection may be regarded as having been erroneous.

[B-135719]

Military Personnel-Retired Pay-Judgment-Res Judicata A judgment under which a retired officer of the uniformed services was awarded retired pay under Title III of the Army and Air Force Vitalization and Retirement Equalization Act of 1948 on the basis that such retired pay was exempt from the dual compensation restrictions in section 212 of the Economy Act of 1932, 5 U.S.C. 59a, but which judgment was based on the erroneous assumption and admission that the officer had the required service to qualify for Title III retired pay, when in fact he did not, does not afford any basis to sanction current payments of retired pay or to approve payments for any period not covered by the judgment in the absence of a judicial determination of the dispute as to the basic fact or as to the application of the rule of res judicata to such a judgment.

To Lieutenant Colonel R. H. MacPherson, Department of the Army, May 31, 1960:

Your letter of January 13, 1960 (forwarded by the Office of the Chief of Finance, Department of the Army under D.O. No. 475, allocated by Department of Defense Military Pay and Allowance Committee), requests an advance decision on the propriety of payment on a voucher (enclosure (1) to your letter) stated in favor of Mr. Nathan R. Warthen in the amount of $922.77, representing an adjustment in the rate of his military retired pay for the period August 4, 1955, to March 31, 1959, inclusive, plus the full amount of such retired pay for the period April 1, 1959, to December 31, 1959, inclusive.

Nathan Reed Warthen was placed on the Army of the United States retired list April 30, 1953, pursuant to the provisions of Title III, act of June 29, 1948, Army and Air Force Vitalization and Retirement Equalization Act of 1948, 62 Stat. 1087, 10 U.S.C. 1036 (1952 ed.), on the basis of a total of 24 years, 8 months and 9 days of satisfactory Federal service. This total service erroneously included a period of 6 years, 11 months and 14 days during which Warthen was a member of the National Guard Reserve. Membership in the National Guard Reserve is not qualifying service for the purposes of section 302(a), Title III of the 1948 law, 10 U.S.C. 1036a (a) (1952 ed.). See Waterbury v. United States, 121 C. Cls. 691, decided April 15, 1952, and 38 Comp. Gen. 633 (B-138684, March 26, 1959). Therefore, Warthen actually has only 17 years, 8 months and 25 days of satisfactory Federal service, which is less than the 20-year minimum prescribed in section 302 (a) of the 1948 law. Since he does not meet the statutory requirements for Title III retired pay, his placement on the Army of the United States retired list was without lawful authority. 38 Comp. Gen. 741, 743.

The Title III retired pay which was thought to have accrued to Warthen during the period May 1, 1953, to August 3, 1955, inclusive, was withheld due to his employment by the United States Government in a civilian capacity at a salary exceeding the $3,000 per annum limitation prescribed in section 212 of the Economy Act of June 30, 1932, 5 U.S.C. 59a. As plaintiff No. 5 in the case of Henry L. Bowman, et al. v. United States, C. Cls. No. 108-58, Warthen instituted suit on March 13, 1958, against the United States to recover "retirement pay under Title III, act of June 29, 1948, which he has not been paid and will not be paid by reason of his employment by the United States in a civilian capacity, for the period commencing with the date of his sixtieth birthday and extending to the date judgment may be entered herein." It was alleged in the petition that "Each plaintiff, upon attaining the age of 60 years, had completed