A-66501, DECEMBER 30, 1935, 15 COMP. GEN. 573

A-66501: Dec 30, 1935

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ARE NOT AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR AND MAY NOT BE CONSTRUCTED BY THE PRESENT CONTRACTOR WITHOUT SUBMITTING THE MATTER TO COMPETITION IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 3709. IT IS DESIRED TO HAVE THE BENEFIT OF YOUR OPINION. TO PROVIDE OFFICE SPACE IN SAN JUAN FOR THE PUERTO RICO RECONSTRUCTION ADMINISTRATION BIDS WERE SOLICITED IN OCTOBER OF THIS YEAR FOR A CONTRACT FOR THE CONSTRUCTION OF NINE TEMPORARY BUILDINGS. THE CONTRACT WAS AWARDED TO THE LOWER BIDDER OF TWO AND WAS EXECUTED ON NOVEMBER 9. NOTICE TO PROCEED WAS GIVEN ON NOVEMBER 12. THE CONSTRUCTION IS TO BE COMPLETED ON DECEMBER 27. THE CONTRACTOR IS ENGAGED ON THE JOB. ALL NINE OF THE BUILDINGS ARE BEING ERECTED ON A SINGLE PLOT OF GROUND.

A-66501, DECEMBER 30, 1935, 15 COMP. GEN. 573

CONSTRUCTION OF PUBLIC BUILDINGS - ADDITIONAL UNITS REQUIRED BEFORE COMPLETION OF ORIGINAL CONTRACT - PUERTO RICO RECONSTRUCTION ADMINISTRATION ADDITIONAL UNITS DESIRED IN CONNECTION WITH BUILDINGS UNDER CONSTRUCTION, AND NOT IN CONTEMPLATION AT TIME OF ORIGINAL CONTRACT, ARE NOT AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR AND MAY NOT BE CONSTRUCTED BY THE PRESENT CONTRACTOR WITHOUT SUBMITTING THE MATTER TO COMPETITION IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES. 5 COMP. GEN. 508 DISTINGUISHED.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR, PUERTO RICO RECONSTRUCTION ADMINISTRATION, DECEMBER 30, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF DECEMBER 14, 1935, AS FOLLOWS:

A QUESTION HAS ARISEN AS TO THE PROCEDURE TO BE FOLLOWED IN PROVIDING FOR THE CONSTRUCTION OF CERTAIN ADDITIONAL OFFICE BUILDINGS FOR THE PUERTO RICO RECONSTRUCTION ADMINISTRATION IN SAN JUAN, PUERTO RICO, AND IT IS DESIRED TO HAVE THE BENEFIT OF YOUR OPINION.

TO PROVIDE OFFICE SPACE IN SAN JUAN FOR THE PUERTO RICO RECONSTRUCTION ADMINISTRATION BIDS WERE SOLICITED IN OCTOBER OF THIS YEAR FOR A CONTRACT FOR THE CONSTRUCTION OF NINE TEMPORARY BUILDINGS. THE CONTRACT WAS AWARDED TO THE LOWER BIDDER OF TWO AND WAS EXECUTED ON NOVEMBER 9, 1935. NOTICE TO PROCEED WAS GIVEN ON NOVEMBER 12, 1935, AND UNDER THE TERMS OF THE CONTRACT, THE CONSTRUCTION IS TO BE COMPLETED ON DECEMBER 27, 1935. AT THE PRESENT TIME, OF COURSE, THE CONTRACTOR IS ENGAGED ON THE JOB. ALL NINE OF THE BUILDINGS ARE BEING ERECTED ON A SINGLE PLOT OF GROUND, SITUATED IN NUNOZ RIVERA PARK, WHICH HAS BEEN LEASED TO THE ADMINISTRATION BY THE INSULAR GOVERNMENT.

IT HAS NOW BEEN DISCOVERED THAT THE SPACE WHICH WILL BE PROVIDED BY THESE BUILDINGS WILL BE INADEQUATE TO HOUSE THE ENTIRE STAFF OF THE ADMINISTRATION. CONSEQUENTLY IT IS DESIRED TO ERECT TWO ADDITIONAL OFFICE BUILDINGS OF EXACTLY THE SAME TYPE AS THE NINE ALREADY CONTRACTED FOR. THE ADDITIONAL BUILDINGS ARE TO BE LOCATED ON THE SAME PLOT OF GROUND.

THE CONTRACT ITSELF APPEARS TO AUTHORIZE A CHANGE IN ITS PROVISIONS TO TAKE CARE OF THIS SITUATION. PARAGRAPH 12 OF THE "GENERAL PROVISIONS" READS AS FOLLOWS:

"12. APPROVAL OF EXTRAS:

"THE AUTHORIZED REPRESENTATIVE OF THE PUERTO RICO RECONSTRUCTION ADMINISTRATION RESERVES THE RIGHT TO MAKE, AT ANY TIME, CHANGES IN THE PLANS AND SPECIFICATIONS THE SAME BEING SUBJECT TO APPROVAL BY THE ADMINISTRATOR. NO CHARGE FOR ANY EXTRA WORK OR MATERIAL WILL BE ALLOWED UNLESS THE SAME HAS BEEN PREVIOUSLY AUTHORIZED IN WRITING BY THE PUERTO RICO RECONSTRUCTION ADMINISTRATION.

"IN CASE THAT ANY CHANGES IN THE PLANS AND SPECIFICATIONS MAY ENTAIL WORK NOT FORESEEN IN THE CONTRACT, THIS WILL BE CONSIDERED AS EXTRA WORK. THE PUERTO RICO RECONSTRUCTION ADMINISTRATION WITH THE APPROVAL OF THE ADMINISTRATOR, RESERVES THE RIGHT TO ENTER INTO A WRITTEN AGREEMENT WITH THE CONTRACTOR TO EXECUTE SUCH EXTRA WORK AT PRICES TO BE MUTUALLY AGREED UPON, OR TO HAVE SAME CARRIED OUT ON A COST PLUS BASIS OR BY ANY OTHER METHOD THAT THE PUERTO RICO RECONSTRUCTION ADMINISTRATION MAY DECIDE.'

UNDER THIS PROVISION IT IS DESIRED TO ENTER INTO A WRITTEN AGREEMENT WITH THE PRESENT CONTRACTOR PROVIDING FOR THE ERECTION OF THE ADDITIONAL UNITS IN ACCORDANCE WITH THE SAME SPECIFICATIONS AND FOR PAYMENT TO HIM ON THE BASIS OF A UNIT PRICE ESTIMATED IN ACCORDANCE WITH THE PRESENT CONTRACT.

THE QUESTION ARISES, HOWEVER, WHETHER THIS COURSE MAY BE PURSUED OR WHETHER, IN VIEW OF REVISED STATUTES, SECTION 3709 (41 U.S.C. SEC. 5), IT IS NECESSARY TO ADVERTISE FOR BIDS FOR THIS SUPPLEMENTARY WORK.

THERE ARE SEVERAL REASONS WHICH MAKE IT DESIRABLE FROM THE POINT OF VIEW OF THIS ADMINISTRATION TO NEGOTIATE WITH THE PRESENT CONTRACTOR FOR THE SUPPLEMENTARY WORK ON THE BASIS OF THE UNIT PRICE REFERRED TO ABOVE RATHER THAN TO ADVERTISE FOR BIDS FOR A SEPARATE CONTRACT. IT IS THE OPINION OF MR. GUILLERMO ESTEVES, THE ASSISTANT REGIONAL ADMINISTRATOR OF THE PUERTO RICO RECONSTRUCTION ADMINISTRATION, THAT NO OTHER CONTRACTORS WOULD BID FOR THIS SUPPLEMENTARY WORK AGAINST THE PRESENT CONTRACTOR. MR. ESTEVES IS A CIVIL ENGINEER AND A FORMER COMMISSIONER OF THE INTERIOR OF PUERTO RICO, WHO HAS HAD LONG EXPERIENCE IN CONTRACT WORK IN PUERTO RICO AND IS WELL QUALIFIED TO JUDGE UPON THESE MATTERS. HIS OPINION SEEMS TO BE WELL SUPPORTED BY THE FOLLOWING CONSIDERATIONS. THE WORK INVOLVED IN THE PROPOSED CONSTRUCTION NATURALLY WOULD REQUIRE USE BY THE CONTRACTOR OF A CERTAIN AMOUNT OF PLANT. EQUIPMENT MUST BE PLACED ON THE SITE AND CERTAIN WORK BUILDINGS MUST BE ERECTED. ALL THIS PRELIMINARY WORK, OF COURSE, COSTS THE CONTRACTOR MONEY. THE PRESENT CONTRACTOR HAS HIS PLANT RIGHT ON THE SITE ALREADY. OBVIOUSLY THIS GIVES HIM A VERY CONSIDERABLE ADVANTAGE IN BIDDING. IN THE SECOND PLACE, EVEN WITHOUT THIS ADVANTAGE, IT IS EXTREMELY UNLIKELY THAT ANY OTHER CONTRACTOR WOULD BE ABLE TO UNDERBID THE PRESENT CONTRACTOR. FOR THE ORIGINAL CONTRACT, ALTHOUGH 25 OR 30 SETS OF SPECIFICATIONS WERE HANDED OUT, ONLY TWO BIDS WERE ACTUALLY RECEIVED, AND THE UNSUCCESSFUL BID WAS $18,000 OR $20,000 HIGHER THAN THE BID OF THE PRESENT CONTRACTOR, AMOUNTING TO $87,000. IT IS UNDERSTOOD THAT THE REASON FOR THE VERY SMALL NUMBER OF BIDS WAS THE SHORT TIME PERMITTED BY THE CONTRACT FOR COMPLETION OF THE WORK. VERY FEW CONTRACTORS ARE APPARENTLY WILLING TO BID FOR WORK IN PUERTO RICO WHICH HAS TO BE COMPLETED RAPIDLY, IN VIEW OF THE NECESSITY FOR IMPORTING A LARGE PROPORTION OF THE MATERIAL USED AND THE CONSEQUENT RISKS OF SERIOUS DELAY.

THE CONSIDERATIONS MENTIONED ABOVE, WHICH MAKE IT UNLIKELY THAT THERE WILL BE ANY COMPETITION, WILL AT LEAST PROBABLY PREVENT THE BIDS OF COMPETITORS BEING ANYWHERE NEAR A PRICE CALCULATED ON THE BASIS OF THE PRESENT CONTRACT. KNOWING THIS FACT THE PRESENT CONTRACTOR WILL, IN ALL PROBABILITY, FEEL SAFE IN ENTERING HIS BID AT A PRICE HIGHER THAN ONE SO CALCULATED. THE PROCEDURE OF ADVERTISING FOR BIDS IS THUS LIKELY TO WORK TO THE DISADVANTAGE OF THE GOVERNMENT, BY PRODUCING A HIGHER PRICE THAN COULD BE SECURED BY NEGOTIATION.

IN ADDITION THERE IS THE FACTOR OF TIME. SPEED IN COMPLETING THE NECESSARY OFFICE BUILDINGS IS OF THE UTMOST DESIRABILITY. THE ADMINISTRATION IS AT PRESENT SEVERELY HANDICAPPED BY THE FACT THAT IT HAS BEEN FORCED TO RENT OFFICES IN A LARGE NUMBER OF DIFFERENT BUILDINGS THROUGHOUT SAN JUAN, SPREADING ITS ORGANIZATION ALL AROUND THE CITY AND MAKING IT VERY AWKWARD TO COORDINATE ACTIVITIES. THE SOONER IT CAN CONCENTRATE THE ENTIRE STAFF IN A SINGLE CLOSELY GROUPED SET OF OFFICES THE MORE EFFECTIVELY IT WILL FUNCTION. IT SEEMS OBVIOUS THAT THE PRESENT CONTRACTOR COULD FINISH THE ADDITIONAL WORK VERY MUCH SOONER THAN ANY OTHER CONTRACTOR. IN THE FIRST PLACE THERE WOULD BE NO DELAY IN THE PRELIMINARY WORK OF SETTING UP A CONSTRUCTION PLANT. HIS PLANT IS ALREADY ON THE SITE. IN THE SECOND PLACE HE COULD START SUCH CONSTRUCTION WORK IMMEDIATELY, WHEREAS ANY OTHER CONTRACTOR WOULD, AS A PRACTICAL MATTER, HAVE TO WAIT UNTIL THE PRESENT CONTRACTOR WAS FINISHED BEFORE HE COULD COMMENCE WORK. IT WOULD BE PHYSICALLY IMPOSSIBLE TO HAVE THE TWO CONTRACTORS WORKING ON THE SAME PLOT OF GROUND.

ANY DELAY IN THE COMPLETION OF THE ADDITIONAL OFFICES SHOULD BE AVOIDED IF POSSIBLE. OTHERWISE THERE WILL BE ADDITIONAL EXPENDITURE FOR RENT OR A LONGER PERIOD OF OVERCROWDING IN THE NINE COMPLETED BUILDINGS.

SECTION 3709 OF THE REVISED STATUTES (41 U.S.C., SEC. 5) REQUIRES, IN GENERAL, THAT GOVERNMENT CONTRACTS BE AWARDED ON THE BASIS OF BIDS SECURED AFTER ADVERTISING, BUT THE GENERAL PRINCIPLE LAID DOWN THERE IS SUBJECT TO CERTAIN EXCEPTIONS. IT SEEMS TO US THAT THE PRESENT CASE COMES WITHIN AN EXCEPTION SET FORTH IN YOUR OPINION JANUARY 21, 1926 (5 COMP. GEN. 508). THE EXCEPTION REFERRED TO IS STATED IN THE FOLLOWING LANGUAGE, QUOTED FROM THAT OPINION:

"IN GENERAL, AN EXISTING CONTRACT MAY NOT BE EXPANDED SO AS TO INCLUDE ADDITIONAL WORK OF ANY CONSIDERABLE MAGNITUDE WITHOUT COMPLIANCE WITH SECTION 3709, REVISED STATUTES UNLESS IT CLEARLY APPEARS THAT THE ADDITIONAL WORK WAS NOT IN CONTEMPLATION AT THE TIME OF THE ORIGINAL CONTRACTING AND IS SUCH AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR AS TO RENDER IT REASONABLY IMPOSSIBLE OF PERFORMANCE BY OTHER THAN THE ORIGINAL CONTRACTOR.'

THE ERECTION OF THE TWO ADDITIONAL UNITS WAS, OF COURSE, NOT CONTEMPLATED AT THE TIME THE ORIGINAL CONTRACT WAS LET. IN VIEW OF THE FACT THAT SPEED OF COMPLETION OF THE CONSTRUCTION IS SO DESIRABLE IN THIS CASE, AND THAT IT WOULD BE PHYSICALLY IMPOSSIBLE TO HAVE TWO CONTRACTORS WORKING ON THE SAME BUILDING SITE AT THE SAME TIME, IT IS BELIEVED THAT THE ERECTION OF THE ADDITIONAL UNITS SHOULD BE REGARDED AS "AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR * * * REASONABLY IMPOSSIBLE OF PERFORMANCE BY OTHER THAN THE ORIGINAL CONTRACTOR.'

TO SUM UP, THE PROPOSED PROCEDURE WOULD SEEM TO SERVE THE INTEREST OF THE UNITED STATES AND TO BE WITHIN AN ESTABLISHED EXCEPTION FROM THE REQUIREMENT OF ADVERTISING. SINCE EARLY COMPLETION OF THE TWO ADDITIONAL OFFICE BUILDINGS IS SO DESIRABLE, AS STATED ABOVE, A PROMPT REPLY TO THIS REQUEST WOULD BE HIGHLY APPRECIATED.

WHILE THE TWO ADDITIONAL BUILDINGS NOW DESIRED MAY NOT HAVE BEEN IN CONTEMPLATION WHEN THE ORIGINAL CONTRACT WAS MADE, THEY ARE SEPARATE AND DISTINCT UNITS AND CANNOT REASONABLY BE CONSIDERED AS AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR.

THE REASONS SUGGESTED IN YOUR LETTER FOR NOT ADVERTISING ARE ALL BASED UPON OPINION OR CONJECTURE AS TO WHAT MIGHT RESULT THEREFROM AND ARE PREDICATED LARGELY UPON THE ASSUMPTION THAT THE PRESENT CONTRACTOR COULD CONSTRUCT THESE TWO ADDITIONAL BUILDINGS IN CONNECTION WITH THE WORK UNDER THE CONTRACT OF NOVEMBER 9, WHEREAS ANY OTHER CONTRACTOR WOULD HAVE TO DELAY BEGINNING WORK ON THE TWO BUILDINGS UNTIL THE CONTRACT OF NOVEMBER 9 IS COMPLETED. HOWEVER, AS THAT CONTRACT IS DUE FOR COMPLETION DECEMBER 27, 1935, IT IS TO BE PRESUMED A NEW CONTRACTOR COULD BEGIN THE WORK ALMOST, IF NOT QUITE, AS SOON AS COULD THE PRESENT CONTRACTOR. BUT, BE THAT AS IT MAY, THE ONLY PROPER WAY TO ASCERTAIN WHETHER ADVERTISING WILL PRODUCE THE DESIRED RESULTS IS TO ADVERTISE, AND THAT IS WHAT THE LAW REQUIRES.

UNDER THE CIRCUMSTANCES, I HAVE TO ADVISE THAT YOU ARE NOT AUTHORIZED TO HAVE THE ADDITIONAL BUILDINGS CONSTRUCTED BY THE PRESENT CONTRACTOR WITHOUT SUBMITTING THE MATTER TO COMPETITION IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES.