B-161570, JAN. 29, 1968

B-161570, JAN. 29, 1968

BIDS - FEDERAL AID, GRANTS, LOANS, ETC. FUNDS - FEDERAL REGULATION COMPLIANCE DECISION TO WALKERBILT WOODWORK, INC., DENYING PROTEST AGAINST AWARD OF CONTRACT TO REMINGTON RAND CO. BY LAROCHE COLLEGE FOR FURNISHING LIBRARY EQUIPMENT UNDER TITLE 1, HIGHER EDUCATION FACILITIES ACT. LOW BIDDER WHO CONTENDS THAT LIBRARY FURNITURE AND EQUIPMENT PURCHASED BY GRANTEE COLLEGE UNDER FEDERALLY ASSISTED LIBRARY CONSTRUCTION PROGRAM IS CLASSIFIED AS BUILT-IN EQUIPMENT RATHER THAN MOVABLE AND THEREFORE COMPETITIVE BIDDING PROCEDURES ARE REQUIRED TO BE FOLLOWED IS ADVISED THAT DETERMINATION BY HEW THAT EQUIPMENT WAS CLASSIFIED AS MOVABLE EQUIPMENT MAY NOT BE DISAGREED WITH AS A MATTER OF LAW. SINCE RIGID PROCEDURES APPLICABLE TO FORMALLY ADVERTISED PROCUREMENTS DO NOT APPLY TO NON-FEDERAL PROCUREMENTS WHEREIN FEDERAL GOVT. PARTICIPATES MERELY AS A GRANTOR OF FUNDS COMPLIANCE OF FEDERAL REQUIREMENTS IS NOT MANDATORY. THE AUTHORITY OF COMMISSIONER UNDER 20 U.S.C. 711 ET SEQ. IS SIMILAR TO SURGEON GENERAL IN ADMINISTERING GRANTS UNDER HILL-BURTON ACT AND COMP. GEN. HAS HELD THAT PRIMARY AUTHORITY OF SURGEON GENERAL TO DETERMINE COMPLIANCE WITH REGULATIONS MUST BE RECOGNIZED.

TO WALKERBILT WOODWORK, INC.:

REFERENCE IS MADE TO YOUR LETTER DATED MAY 23, 1967, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE AWARD MADE BY THE LAROCHE COLLEGE, PENNSYLVANIA, TO THE REMINGTON RAND COMPANY, OF A CONTRACT FOR THE FURNISHING OF LIBRARY FURNITURE AND EQUIPMENT, THE AMOUNT OF WHICH WAS PARTIALLY FUNDED UNDER A GRANT MADE PURSUANT TO TITLE I OF THE HIGHER EDUCATION FACILITIES ACT OF 1963 (20 U.S.C. 711).

UNDER THAT STATUTE, THE UNITED STATES COMMISSIONER OF EDUCATION MAKES AWARDS FROM A PARTICULAR STATE'S ALLOTMENT TO THOSE APPLICANT INSTITUTIONS WITHIN THE STATE WHOSE APPLICATIONS ARE CERTIFIED BY THE STATE TO HAVE GREATER PRIORITY THAN ANY OTHER APPLICATIONS WITHIN THE STATE ON THE BASIS OF CRITERIA SET FORTH IN THE STATE'S PLAN. THE STATE ALSO CERTIFIES TO THE COMMISSIONER, THE FEDERAL SHARE OF THE PROJECT DEVELOPMENT COST TO WHICH THE APPLICANT IS ENTITLED UNDER THE STATE PLAN BUT NOT TO EXCEED 33- 1/3 PERCENT OF THE ELIGIBLE COSTS IN THE CATEGORY IN WHICH LAROCHE COLLEGE QUALIFIES.

AN AWARD IS THEN MADE BY THE COMMISSIONER ON THE BASIS OF SUCH CERTIFICATION FROM A STATE COMMISSION, WHICH AWARD IS SUBJECT TO CERTAIN TERMS AND CONDITIONS SET FORTH IN THE REGULATIONS IMPLEMENTING THE STATUTE AND GRANT DOCUMENT. IN CONNECTION WITH THE AWARD OF THE CONTRACT FOR CONSTRUCTION AND THE ACQUISITION AND INSTALLATION OF BUILT-IN EQUIPMENT, THE REGULATIONS (45 CFR 170.3) PROVIDE THAT, EXCEPT IN SPECIAL CASES WHERE ALTERNATE CONTRACTING PROCEDURES ARE APPROVED, SUCH CONTRACTS "SHALL BE AWARDED ON THE BASIS OF COMPETITIVE BIDDING OBTAINED BY PUBLIC ADVERTISING.' IN CONNECTION WITH THE ACQUISITION OF MOVABLE EQUIPMENT, HOWEVER, THE REGULATIONS (45 CFR 170.4) PROVIDE THAT SUCH EQUIPMENT "SHALL BE PROCURED IN AN ECONOMICAL MANNER CONSISTENT WITH SOUND BUSINESS PRACTICE, IN ACCORDANCE WITH SUCH INSTRUCTIONS AS THE COMMISSIONER MAY FROM TIME TO TIME PRESCRIBE.' IN THE LATTER CATEGORY OF PROCUREMENT, CONSIDERABLY GREATER LATITUDE IS AFFORDED THE GRANTEE SINCE SELECTION OF EQUIPMENT OF THIS TYPE OFTEN INVOLVES VALUES OR INTANGIBLE CONSIDERATIONS NOT READILY REDUCIBLE IN TERMS OF PRICE.

THE LAROCHE COLLEGE, WHICH IS OWNED AND OPERATED BY A NONPROFIT ORGANIZATION, RECEIVED INITIAL APPROVAL ON APRIL 25, 1966, FOR A GRANT OF FEDERAL ASSISTANCE FOR CONSTRUCTION OF A LIBRARY UNDER THE PROVISIONS OF THE ACT. WHILE THE ACT ITSELF DOES NOT CONTAIN ANY LIMITATION WITH RESPECT TO THE MANNER IN WHICH CONTRACTS FOR PROJECTS GRANTED FEDERAL ASSISTANCE ARE AWARDED, THE REGULATIONS PROMULGATED UNDER THE ACT DO PROVIDE PROCUREMENT GUIDELINES. SPECIFICALLY, 45 CFR 170.3 AND 170.4 PROVIDE AS FOLLOWS: "170.3 REQUIREMENT FOR COMPETITIVE BIDDING ON CONTRACTS FOR CONSTRUCTION AND FOR ACQUISITION AND INSTALLATION OF BUILT- IN EQUIPMENT.

"/A) ALL CONTRACTING FOR NEW CONSTRUCTION, AND ALL ORDERS FOR THE ACQUISITION AND INSTALLATION OF BUILT-IN EQUIPMENT NOT COVERED BY GENERAL CONSTRUCTION CONTRACTS, SHALL BE ON A FIXED PRICE BASIS. CONTRACTS FOR NEW CONSTRUCTION AND FOR ACQUISITION AND INSTALLATION OF BUILT-IN EQUIPMENT SHALL BE AWARDED ON THE BASIS OF COMPETITIVE BIDDING OBTAINED BY PUBLIC ADVERTISING (PROVIDED, HOWEVER, THAT FOR APPLICATIONS APPROVED PRIOR TO THE PUBLICATION OF THESE REGULATIONS, THE COMPETITIVE BIDDING REQUIREMENT MAY BE SATISFIED BY OBTAINING THREE OR MORE BIDS).

"/B) EXCEPT WHERE THE COMMISSIONER SPECIFICALLY APPROVES ALTERNATIVE CONTRACTING PROCEDURES DUE TO SPECIAL PROBLEMS OR CONDITIONS, ALL CONTRACTING FOR REHABILITATION, RENOVATION, REMODELING, CONVERSION, OR IMPROVEMENT OF EXISTING STRUCTURES SHALL BE UNDERTAKEN IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (A) OF THIS SECTION.

"/C) THE CONCURRENCE OF THE COMMISSIONER (INCLUDING CONCURRENCE IN ANY PROVISION FOR PREQUALIFICATION OF BIDDERS) SHALL BE OBTAINED BEFORE ADVERTISING FOR BIDS AND BEFORE AWARDING ANY CONTRACT FOR CONSTRUCTION OR FOR ACQUISITION AND INSTALLATION OF BUILT-IN EQUIPMENT FOR WHICH GRANT OR LOAN ASSISTANCE UNDER THE ACT IS REQUESTED. "170.4 REQUIREMENT FOR ECONOMICAL METHODS OF PURCHASE OF MOVABLE EQUIPMENT.

"ALL MOVABLE INITIAL EQUIPMENT, THE COST OF WHICH IS TO BE CHARGED TO A PROJECT COVERED BY A GRANT OR LOAN APPLICATION UNDER THE ACT, SHALL BE PROCURED IN AN ECONOMICAL MANNER CONSISTENT WITH SOUND BUSINESS PRACTICE, IN ACCORDANCE WITH SUCH INSTRUCTIONS AS THE COMMISSIONER MAY FROM TIME TO TIME PRESCRIBE.' OFFICE OF EDUCATION BULLETIN NO. 10 (REVISION 2) DATED FEBRUARY 9, 1967, WHICH IMPLEMENTED 45 CFR 170.4, PROVIDES ON PAGE 2 AS FOLLOWS:

"A. DEFINITION OF EQUIPMENT

"/3)-INITIAL MOVABLE EQUIPMENT MEANS ALL ITEMS OF INITIAL EQUIPMENT OTHER THAN BUILT-IN EQUIPMENT, WHICH ARE NECESSARY AND APPROPRIATE FOR THE FUNCTIONING OF A PARTICULAR ACADEMIC FACILITY FOR ITS SPECIFIC PURPOSE, AND WILL BE USED SOLELY OR PRIMARILY IN THE ROOMS OR AREAS COVERED BY AN APPLICATION UNDER THE ACT (AS DISTINGUISHED FROM ITEMS WHICH ARE APPROPRIATE FOR ACADEMIC PURPOSES BUT ARE NOT TO BE USED PRINCIPALLY WITHIN THE ROOMS INCLUDED IN THE PROJECT). THE TERM DOES NOT INCLUDE BOOKS, CURRICULAR OR PROGRAM MATERIALS, CARPETS OR DRAPES, OR ANY ITEMS OF CURRENT OPERATING EXPENSE SUCH AS FUEL, SUPPLIES, COMPONENT ITEMS SUCH AS VACUUM TUBES WHICH HAVE NO FUNCTION APART FROM OTHER ITEMS IN WHICH THEY ARE TO BE INCORPORATED, OR MANUFACTURED ITEMS WHICH ARE CONSUMED IN USE OR HAVE A SHORT USEFUL LIFE.- (45 CFR 170.1 (H) ("

IN THE LIGHT OF THE FOREGOING STATUTORY AND REGULATION BACKGROUND, WE HAVE CAREFULLY CONSIDERED YOUR PROTEST AND WE HAVE CONCLUDED, FOR THE REASONS SET OUT BELOW THAT YOUR PROTEST MUST BE DENIED. DURING THE FALL OF 1966, LAROCHE COLLEGE DEVELOPED SPECIFICATIONS FOR ALL FURNITURE AND EQUIPMENT TO BE PLACED IN THE NEW LIBRARY THEN UNDER CONSTRUCTION. THE SPECIFICATIONS CALLED FOR REMINGTON RAND CATALOG ITEMS, OR EQUAL, AND COVERED SUCH TYPICAL LIBRARY FURNISHINGS AS TABLES, CHAIRS, BOOKS, STACKS, DESKS, CARD CATALOGS, ETC. UNDER THE ABOVE-CITED BULLETIN, THESE ITEMS FELL WITHIN THE DEFINITION OF "INITIAL MOVABLE EQUIPMENT.'

THE RECORD INDICATES THAT EIGHT FIRMS WERE REQUESTED TO SUBMIT BIDS ON THE LIBRARY FURNITURE AND EQUIPMENT AND THAT FOUR BIDS WERE RECEIVED BY THE COLLEGE. ON MARCH 29, 1967, THE FOUR BIDS SUBMITTED IN RESPONSE TO THE SOLICITATION WERE OPENED AND THE FOLLOWING BID TABULATION WAS MADE:

REMINGTON RAND COMPANY $113,687

SJOSTROM COMPANY 105,470

C.M. RICHENLAUF COMPANY 99,125

WALKERBILT WOODWORK, INC. 94,930

THESE BIDS WERE ANALYZED BY OFFICIALS OF THE COLLEGE AND, AS TO THE THREE LOWEST BIDS, THE COLLEGE BUILDING COMMITTEE CONCLUSIONS WERE SUMMARIZED AS FOLLOWS:

"SJOSTROM COMPANY

"1. UNMARKED CATALOG SHOWED WOOD FIXTURES ONLY. THE FURNITURE DID NOT APPEAR TO MEET SPECIFICATIONS FROM APPRAISAL OF CATALOG.

"2. ESTEY METAL SHELVING WAS PROPOSED BY VENDOR. UPON VISIT TO DUQUESNE UNIVERSITY AND INSPECTION OF THE SHELVING IN THAT INSTALLATION, IT WAS DETERMINED THAT THE STEEL SHELVING WAS OF POOR QUALITY AND NOT IN CONFORMITY WITH SPECIFICATIONS.

"C.M. RICHENLAUF COMPANY

"1. BASED ON REVIEW OF TWO UNMARKED CATALOGS THE PROPOSED EQUIPMENT DID NOT MEET SPECIFICATIONS.

"2. DELIVERY COULD NOT BE ASSURED ON TIME FOR OPENING OF SCHOOL THIS COMING FALL.

"WALKERBILT WOODWORK, INC.

"1. BIDDER FURNISHED TWO UNMARKED CATALOGS WITH NO ATTEMPT TO SHOW -OR EQUAL- COMPLIANCE, NOR DID BID INCLUDE A STATEMENT -AS TO PLANS AND SPECIFICATIONS.- THE BID SHOULD HAVE DESCRIBED IN DETAIL THE ITEMS WHICH WERE TO BE PROVIDED IN ORDER TO COMPLY WITH THE -OR EQUAL- SPECIFICATIONS.

"2. COMMITTEE VISITED A NEARBY COLLEGE TO INSPECT A WALKERBILT INSTALLATION. NUMEROUS FAULTS IN MATERIALS AND WORKMANSHIP WERE POINTED OUT. NUMEROUS GLUE VOIDS, POOR QUALITY HARDWARE, CHIPPED PAINT ON SHELVING AND POORLY CONSTRUCTED JOINTS WERE AMONG THE FAULTS SPECIFICALLY CITED.

"3. DELIVERY PERFORMANCE WAS DESCRIBED AS -HORRIBLE- BY NEIGHBORING COLLEGE. AN ASSURED DELIVERY DATE OF SEPTEMBER 25, 1966, RESULTED IN DELIVERY IN FEBRUARY 1967.'

IN THE CONTEXT OF THE ABOVE CONCLUSIONS, THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE ADVISED US THAT: "FOR THE FOREGOING REASONS THE BUILDING COMMITTEE DETERMINED TO AWARD THE CONTRACT TO REMINGTON RAND, AND REQUESTED THE PHILADELPHIA REGIONAL OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT TO CONCUR IN THE AWARD TO REMINGTON RAND. THIS WAS NOT REQUIRED UNDER THE REGULATIONS BUT IN ANY CASE THE REGIONAL OFFICE REFERRED THE ENTIRE QUESTION OF THE BID AWARD TO THE OFFICE OF EDUCATION FOR REVIEW. IN THE MEANTIME, THE GRANTEE ENTERED INTO A CONTRACT FOR THE SUBJECT EQUIPMENT WITH THE REMINGTON RAND COMPANY. "IN REVIEWING THE FOREGOING FACTS AND IN THE LIGHT OF THE EARLIER BACKGROUND DISCUSSION -- AND WHILE WE WOULD NOT NECESSARILY MAKE THE SAME DECISION IF IT WERE OURS TO MAKE -- WE DO NOT FEEL THAT THE ACTION OF THE GRANTEE IN REFUSING THE LOWER BIDS AND MAKING THE AWARD TO REMINGTON RAND WAS SO WITHOUT BASIS ON THE RECORD AS TO AMOUNT TO A SUBSTANTIAL FAILURE TO COMPLY WITH THE PROCUREMENT REQUIREMENTS AS SET FORTH IN THE REGULATIONS AND IN HEFA BULLETIN NO. 10 (REVISION 2).'

YOU CONTEND THAT (1) THE LIBRARY FURNITURE AND EQUIPMENT PURCHASED BY LAROCHE COLLEGE FROM THE REMINGTON RAND COMPANY IS PROPERLY CLASSIFIABLE AS BUILT-IN EQUIPMENT RATHER THAN MOVABLE EQUIPMENT AND THAT, THEREFORE, THE PROVISIONS OF 45 CFR 170.3 ARE APPLICABLE; (2) THAT THE COLLEGE DID NOT RECEIVE THE NECESSARY PRIOR CONCURRENCE OF THE OFFICE OF EDUCATION IN THE AWARD OF THE CONTRACT TO THE REMINGTON RAND COMPANY; (3) THAT THE REASONS GIVEN BY THE COLLEGE FOR REJECTING YOUR FIRM'S BID RAISES A QUESTION OF COMPLIANCE WITH FEDERAL REQUIREMENTS; AND (4) THAT THE AWARD OF THE BASIC CONSTRUCTION CONTRACT BY THE COLLEGE WAS NOT IN ACCORDANCE WITH THE THEN APPLICABLE FEDERAL STANDARDS.

IN REGARD TO YOUR FIRST CONTENTION THAT THE LIBRARY FURNITURE AND EQUIPMENT PURCHASED BY THE COLLEGE IS PROPERLY CLASSIFIABLE AS BUILT-IN EQUIPMENT, THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE HAS AGAIN REVIEWED THE SPECIFICATIONS COVERING THE EQUIPMENT IN QUESTION, AND THE DEPARTMENT HAS ADVISED US THAT ITS REVIEW HAS CONFIRMED ITS PREVIOUS CONCLUSION THAT ALL OR SUBSTANTIALLY ALL OF THE EQUIPMENT INVOLVED IS PROPERLY CLASSIFIABLE AS MOVABLE EQUIPMENT. WE FIND NO VALID BASIS TO DISAGREE WITH THAT DETERMINATION AS A MATTER OF LAW. SEE HARTBERG V AMERICAN FOUNDERS' SECURITIES CO., 249 N.W. 48, 91 A.L.R. 536.

IN REGARD TO YOUR SECOND CONTENTION, PRIOR CONCURRENCE IN THE AWARD OF CONTRACTS FOR MOVABLE EQUIPMENT IS NOT REQUIRED BY THE REGULATIONS IN A MANDATORY SENSE. SEE SECTION E, PROCEDURES, POST APPROVAL, PAGE 6 OF BULLETIN NO. 10, CITED ABOVE.

THIRDLY, YOU CONTEND THAT THE REASONS GIVEN BY THE COLLEGE FOR REJECTING YOUR FIRM'S BID AND MAKING AN AWARD TO THE HIGHEST BIDDER, REMINGTON RAND, RAISES A QUESTION OF COMPLIANCE WITH FEDERAL REQUIREMENTS. IT SHOULD BE NOTED THAT WHILE REMINGTON RAND SUBMITTED THE HIGHEST BID, ITS BID WAS DETERMINED TO BE THE LOWEST RESPONSIVE BID RECEIVED FROM A RESPONSIBLE BIDDER. MOREOVER, THE RATHER RIGID PROCEDURES APPLICABLE TO FORMALLY ADVERTISED PROCUREMENTS BY THE FEDERAL GOVERNMENT DO NOT APPLY TO NON- FEDERAL PROCUREMENTS WHEREIN THE FEDERAL GOVERNMENT PARTICIPATES MERELY AS A GRANTEE OF FUNDS TO PARTIALLY SUPPORT THE PROCUREMENTS WHICH ARE EFFECTED BY LOCAL AGENCIES OR INSTITUTIONS.

IN REGARD TO YOUR FOURTH CONTENTION THAT THE AWARD OF THE BASIC CONSTRUCTION CONTRACT COVERING THE CONSTRUCTION OF THE LIBRARY BUILDING WAS NOT IN ACCORDANCE WITH THE THEN APPLICABLE STANDARDS WHICH, YOU STATE, REQUIRED PUBLIC ADVERTISING FOR BIDS, IT IS REPORTED BY THE DEPARTMENT THAT AT THE TIME SUCH CONTRACT WAS AWARDED IN APRIL 1966, SECTION 170.2 (I) OF THE DEPARTMENT'S REGULATIONS PROVIDED THAT COMPETITIVE BIDDING WAS TO BE INVITED BY GRANTEES PRIOR TO AWARD OF CONSTRUCTION CONTRACTS EITHER BY PUBLIC ADVERTISING OR BY SOLICITING THREE OR MORE BIDS. REGARDING THE OPTION TO SOLICIT THREE OR MORE BIDS, IT IS REPORTED THAT SUCH ALTERNATIVE WAS DELETED BY AN AMENDMENT TO THE REGULATIONS DATED OCTOBER 13, 1966. SINCE THE REGULATIONS IN EFFECT AT THE TIME OF THE AWARD OF THE CONSTRUCTION CONTRACT PERMITTED THE SOLICITATION OF THREE OR MORE BIDS AND SINCE THE RECORD INDICATES THAT LAROCHE COLLEGE DID OBTAIN THREE OR MORE BIDS AND AWARDED THE CONTRACT TO THE LOWEST BIDDER, WE ARE OF THE OPINION THAT THERE WAS COMPLIANCE WITH THE REQUIREMENTS OF EXISTING REGULATIONS.

WE BELIEVE THAT THE AUTHORITY OF THE COMMISSIONER OF EDUCATION WITH RESPECT TO GRANTS UNDER 20 U.S.C. 711, ET SEQ., IS SOMEWHAT SIMILAR TO THAT OF THE SURGEON GENERAL OF THE UNITED STATES IN ADMINISTERING GRANTS UNDER TITLE VI OF THE PUBLIC HEALTH SERVICE ACT, AS AMENDED (POPULARLY KNOWN AS THE HILL-BURTON ACT), 42 U.S.C. 291, ET SEQ. WE HAVE HELD THAT THE PRIMARY AUTHORITY OF THE SURGEON GENERAL TO DETERMINE COMPLIANCE WITH THE REGULATIONS IMPOSED BY HIM UNDER THE HILL-BURTON ACT MUST BE RECOGNIZED. SEE B-141932, MAY 2, 1960; B 151187, JULY 11, 1963; AND B- 161681, AUGUST 11, 1967. SEE ALSO CLEMENT MARTIN, INC. V DICK CORP., 97 F.SUPP. 961, 964. WE LIKEWISE BELIEVE THAT RECOGNITION MUST BE GIVEN TO THE PRIMARY AUTHORITY OF THE COMMISSIONER OF EDUCATION TO DETERMINE COMPLIANCE WITH THE REGULATIONS PROMULGATED UNDER THE HIGHER EDUCATION FACILITIES ACT OF 1963. IN CONCLUSION, WE MUST ADVISE THAT ANY FURTHER INQUIRIES RESPECTING THE ADMINISTRATION OF THE LAROCHE COLLEGE GRANT PROGRAM SHOULD BE DIRECTED TO THE COMMISSIONER OF EDUCATION.