B-158525, DEC. 30, 1966

B-158525, DEC. 30, 1966

TO THE SECRETARY OF THE NAVY:

WE REFER TO THE LETTERS OF AUGUST 23 AND NOVEMBER 4, 1966, WITH ENCLOSURES, FROM THE DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND, REFERENCE SUP 0242A, IN CONNECTION WITH THE REQUEST FROM SWITLIK PARACHUTE COMPANY THAT WE RECONSIDER OUR DECISION B-158525, MAY 26, 1966, 45 COMP. GEN. -. IN THAT DECISION WE CONCLUDED THAT RUBBER FABRICATORS, INCORPORATED, WAS ENTITLED TO AN OPPORTUNITY TO ACCEPT AWARD OF THE SET- ASIDE PORTION OF THE FIRST PROGRAM YEAR'S REQUIREMENTS UNDER INVITATION FOR BIDS NO. 383-410.66, NAVY AVIATION SUPPLY OFFICE, AND THAT THE AWARD OF THIS PORTION OF THE PROCUREMENT TO SWITLIK PARACHUTE COMPANY, INCORPORATED, SHOULD BE CANCELLED IN THE EVENT RUBBER FABRICATORS IS WILLING TO ACCEPT AWARD OF THIS PORTION OF THE PROCUREMENT AT THE PRICE OF THE AWARD TO SWITLIK. THE FACTS WHICH WERE SET FORTH IN OUR DECISION OF MAY 26, 1966, ARE NOT IN DISPUTE AND WILL NOT BE REPEATED.

COUNSEL FOR SWITLIK HAS ALSO SENT US LETTERS DATED JUNE 21 AND JUNE 24, 1966, OPPOSING CANCELLATION. THE ARGUMENTS PRESENTED THEREIN WERE ALL CONSIDERED IN REACHING OUR DECISION OF MAY 26, 1966, AND WE FIND NO FURTHER COMMENT THEREON NECESSARY.

THE CONTRACTING OFFICER IN HIS STATEMENT DATED AUGUST 12, 1966, HAS RAISED SEVERAL POINTS OF DISAGREEMENT WITH OUR DECISION OF MAY 26, 1966. AMONG OTHER THINGS HE GIVES TWO EXAMPLES OF POSSIBLE BIDS ON EITHER THE SINGLE OR MULTI-YEAR BASIS BY ONE OR MORE SURPLUS LABOR CONCERNS, AND RAISES HYPOTHETICAL QUESTIONS AS TO WHICH BIDDER WOULD BE ENTITLED TO PREFERENCE FOR THE SET-ASIDE IN EACH CASE. WE AGREE THAT THE EXAMPLES GIVEN POSE MORE DIFFICULT PROBLEMS THAN THE PRESENT CASE, BUT WE DO NOT HAVE THESE PROBLEMS BEFORE US AND WE DECLINE TO RULE ON THEM. WE ASSUME THAT CONSIDERATION WILL BE GIVEN SUCH CASES IN ANY REVISION OF THE REGULATIONS DEALING WITH SET-ASIDES UNDER MULTI-YEAR PROCUREMENTS.

WE STATED IN OUR DECISION OF MAY 26, 1966, THAT THE PROBLEM BEFORE USE ADMITTEDLY WAS NOT DEALT WITH BY THE REGULATIONS, AND OUR DECISION WAS BASED ON THE APPLICATION OF CERTAIN PRINCIPLES WHICH WE FELT WERE IMPLICIT IN THE FACT THAT A PORTION OF THE PROCUREMENT HAD BEEN EXPRESSLY SET ASIDE FOR LABOR SURPLUS CONCERNS.

SO FAR AS THE LABOR SURPLUS SET-ASIDE IS CONCERNED, THE CONTRACTING OFFICER STATES THAT:

"* * * IT WAS HIS INTENTION TO GIVE FIRST CONSIDERATION TO THE MULTI-YEAR PROVISIONS OF THE SOLICITATION AND THAT IRRESPECTIVE OF WHETHER THE AWARD WAS MADE ON THE BASIS OF THE ONE-YEAR REQUIREMENT (LOT I) OR THE MULTI- YEAR REQUIREMENTS (LOT II), LABOR SURPLUS CONSIDERATIONS WERE OF SECONDARY IMPORTANCE.'

WE HAVE THE FOLLOWING OBSERVATIONS WITH REGARD TO THE ABOVE STATEMENT. IF AWARD ON THE NON-SET-ASIDE PORTION OF THE PROCUREMENT HAD BEEN MADE ON THE BASIS OF THE ONE-YEAR REQUIREMENT, THERE COULD HAVE BEEN NO MULTI-YEAR CONSIDERATIONS, AND THERE WOULD HAVE BEEN NO QUESTION AS TO THE ELIGIBILITY OF RUBBER FABRICATORS FOR THE SET ASIDE. THE AWARD WHICH IS BEING QUESTIONED WAS FOR THAT PORTION OF THE MULTI-YEAR PROCUREMENT WHICH HAD BEEN EXPRESSLY RESERVED FOR SURPLUS LABOR PARTICIPATION. OUR DECISION OF MAY 26, 1966, WAS PREDICATED ON THE ASSUMPTION THAT THE MAKING OF A LABOR SURPLUS SET ASIDE MEANT THAT PREFERENCE IN THE AWARD OF THE SET- ASIDE SHOULD BE GIVEN TO LABOR SURPLUS CONCERNS. IF THIS WERE NOT SO, NO SET-ASIDE SHOULD HAVE BEEN MADE, THUS PERMITTING PROCUREMENT OF THE ENTIRE QUANTITY SOLELY ON A MULTI-YEAR VERSUS ONE-YEAR BASIS WITHOUT CONSIDERATION OF SURPLUS LABOR PROBLEMS. WE DO NOT SEE HOW IT REASONABLY CAN BE CONTENDED THAT THE LABOR SURPLUS ASPECT OF A LABOR SURPLUS SET- ASIDE SHOULD BE CONSIDERED OF SECONDARY IMPORTANCE UNDER ANY TYPE OF CONTRACT. CERTAINLY, IF SUCH A POLICY IS TO BE FOLLOWED, REGULATORY INSTRUCTIONS TO THIS EFFECT ARE REQUIRED.

IN THESE CIRCUMSTANCES WE FIND NO LEGAL BASIS FOR REVERSING THE POSITION IN OUR DECISION OF MAY 26, 1966. WE SUGGEST THAT THIS MATTER BE BROUGHT TO THE ATTENTION OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) COMMITTEE FOR DRAFTING OF SUCH REGULATIONS REGARDING SET-ASIDES IN MULTI- YEAR PROCUREMENTS AS ARE DEEMED APPROPRIATE.

THE FOLLOWING COMMENTS PERTAIN TO THE QUESTION WHETHER RUBBER FABRICATORS QUALIFIES AS A LABOR SURPLUS AREA CONCERN FOR THE LABOR SURPLUS SET- ASIDE.

A REVIEW OF RUBBER FABRICATORS' BID SHOWS IT COMPLIED WITH THE REQUIREMENTS OF CLAUSE 703, THE BIDDER'S REPRESENTATION AS TO LABOR SURPLUS PREFERENCE AND CLAUSE 704, THE BIDDER'S REPRESENTATION AS TO AREAS OF PERFORMANCE. RUBBER FABRICATORS REPRESENTED ITSELF AS BEING A PERSISTENT LABOR SURPLUS AREA CONCERN.

WE HAVE A LETTER DATED NOVEMBER 21, 1966 (COPY ENCLOSED), FROM COUNSEL FOR RUBBER FABRICATORS GIVING THE NAME AND LOCATION OF ITS SUBCONTRACTORS AND DOLLAR VALUES OF MATERIALS WHICH WILL BE FURNISHED BY ITS SUBCONTRACTORS LOCATED IN AREAS OF PERSISTENT LABOR SURPLUS. THIS LETTER ALSO GIVES RUBBER FABRICATORS' COST OF MANUFACTURE WHICH TOGETHER WITH THE MATERIALS INDICATE THAT MORE THAN 50 PERCENT OF THE TOTAL COST OF THE ITEMS IN THE PROCUREMENT WILL BE INCURRED IN LABOR SURPLUS AREAS.

THE QUESTION IS WHETHER THE INFORMATION IN THE LETTER OF NOVEMBER 21, 1966, MAY BE CONSIDERED BY YOUR DEPARTMENT IN DETERMINING WHETHER RUBBER FABRICATORS QUALIFIES AS A LABOR SURPLUS AREA CONCERN. THE ANSWER TO THIS QUESTION IS YES PURSUANT TO THE AUTHORITY IN B-153267, JUNE 8, 1964, WHERE WE STATED AS FOLLOWS:

"IN ANY EVENT UNDER THE ABOVE-QUOTED PROVISIONS OF PARAGRAPH (D) IT APPEARS THE SUCCESSFUL BIDDER AGREES ONLY THAT, IF IT IS AWARDED A CONTRACT AS A PERSISTENT LABOR SURPLUS AREA CONCERN, IT WILL PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF THE PRODUCTION IN AREAS CLASSIFIED AT TIME OF AWARD, OR AT TIME OF PERFORMANCE OF THE CONTRACT, AS PERSISTENT LABOR SURPLUS AREAS.'

SEE ALSO B-158002, FEBRUARY 28, 1966.

SUBPARAGRAPH (B) OF CLAUSE 705 OF THE INSTANT INVITATION PROVIDES AS FOLLOWS:

"/B) THE BIDDER AGREES THAT IF AWARDED A CONTRACT FOR WHICH HE WOULD NOT HAVE QUALIFIED HAD HE NOT BEEN A PERSISTENT LABOR SURPLUS AREA CONCERN, HE WILL PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF THE PRODUCTION IN AREAS CLASSIFIED AT THE TIME OF AWARD OR AT THE TIME OF PERFORMANCE OF THE CONTRACT, AS PERSISTENT LABOR SURPLUS AREAS; FURTHER, THAT IF AWARDED A CONTRACT AS A SUBSTANTIAL LABOR SURPLUS AREA CONCERN, HE WILL PERFORM OR CAUSE TO BE PERFORMED A SUBSTANTIAL PROPORTION OF THE PRODUCTION IN AREAS CLASSIFIED AT THE TIME OF AWARD OR AT THE TIME OF PERFORMANCE OF THE CONTRACT AS SUBSTANTIAL OR PERSISTENT LABOR SURPLUS AREAS.'

SUBPARAGRAPH (B) OF CLAUSE 705 IS SUBSTANTIALLY THE SAME AS PARAGRAPH (D) REFERRED TO IN THE ABOVE QUOTATION FROM B-153267.

WE GATHER FROM THE CONTRACTING OFFICER'S LETTER OF OCTOBER 31, 1966,THAT HE WOULD TAKE THE POSITION THAT THE INFORMATION IN RUBBER FABRICATORS' LETTER OF NOVEMBER 21, 1966, REGARDING ITS AREAS OF PERFORMANCE, MAY NOT BE CONSIDERED IN DETERMINING WHETHER RUBBER FABRICATORS QUALIFIES AS A LABOR SURPLUS AREA CONCERN SINCE IT WAS FURNISHED AFTER BID OPENING. SUPPORT OF HIS POSITION THE CONTRACTING OFFICER APPARENTLY WOULD RELY ON B -151247, JUNE 28, 1963, AND SUBPARAGRAPH (C) OF CLAUSE 703. THIS SUBPARAGRAPH PROVIDES:

"/C) FAILURE TO MAKE AN AFFIRMATIVE REPRESENTATION AND TO SUBMIT IN YOUR BID THE ADDITIONAL (INFORMATION) CONCERNING AREAS OF PERFORMANCE CALLED FOR ELSEWHERE HEREIN (SEE CLAUSE ENTITLED ,AREAS OF PERFORMANCE--- LABOR SURPLUS AREA CONCERN--- INFORMATION TO BE FURNISHED BY BIDDER") (CLAUSE 704) WILL PRECLUDE CONSIDERATION OF YOUR COMPANY AS A LABOR SURPLUS AREA CONCERN.'

IN B-151247, JUNE 28, 1963, A CONCERN WANTED TO CHANGE ITS PRIORITY FOR THE LABOR SURPLUS SET-ASIDE FROM GROUP 3 TO GROUP 1 BY FURNISHING ADDITIONAL INFORMATION AFTER BID OPENING. THIS CHANGE WAS NOT PERMITTED SINCE IT WOULD HAVE DISCRIMINATED AGAINST THE BIDDER WITH A GROUP I PRIORITY, THE FIRST ELIGIBLE BIDDER. THE FACTS IN B-151247, JUNE 28, 1963, ARE MATERIALLY DIFFERENT FROM THE FACTS IN THE INSTANT CASE; CONSEQUENTLY, WE FIND THAT B-151247 WOULD HAVE NO BEARING ON THE QUESTION WHETHER THE INFORMATION IN RUBBER FABRICATORS' LETTER OF NOVEMBER 21, 1966, MAY BE CONSIDERED.

THE RECORD INDICATES THAT RUBBER FABRICATORS FURNISHED THE INFORMATION REQUIRED BY CLAUSES 703 AND 704. ALSO, THAT RUBBER FABRICATORS APPARENTLY WILL COMPLY WITH ITS AGREEMENT UNDER SUBPARAGRAPH (B) OF CLAUSE 705. THESE CIRCUMSTANCES IT IS OUR VIEW THAT SUBPARAGRAPH (C) OF CLAUSE 703 WOULD NOT BE APPLICABLE AND WOULD NOT PRECLUDE YOUR DEPARTMENT FROM CONSIDERING THE INFORMATION IN RUBBER FABRICATORS' LETTER OF NOVEMBER 21, 1966.

IF YOUR DEPARTMENT DETERMINES THAT RUBBER FABRICATORS QUALIFIES AS A LABOR SURPLUS AREA CONCERN, THE CONTRACT TO SWITLIK SHOULD BE CANCELLED IN ACCORDANCE WITH OUR DECISION OF MAY 26, 1966, AND AWARD SHOULD BE MADE TO RUBBER FABRICATORS AS INDICATED IN THAT DECISION.

WE ARE RETURNING EXHIBIT (4) AS REQUESTED IN THE LETTER OF AUGUST 23, 1966.