B-141932, MAY 2, 1960

B-141932: May 2, 1960

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

THE PRIME CONTRACT FOR THE PROJECT WAS AWARDED. IT DOES NOT APPEAR THAT ITS BID WAS EXPRESSLY LIMITED TO THAT EQUIPMENT OR THAT IT INDICATED ANY EXCEPTION TO THE SPECIFICATIONS. SAMFORD WAS ADVISED THAT IN THE VIEW OF THE SUPERVISING ARCHITECT THE MONARCH EQUIPMENT WOULD NOT MEET THE SPECIFICATIONS AND. WAS NOT ACCEPTABLE. UNDER THE PROVISIONS OF THE CONTRACT THE MATTER WAS SUBMITTED TO ARBITRATION. A COPY OF WHICH WAS ENCLOSED WITH YOUR LETTER. STATES THAT THE EVIDENCE DISCLOSED THAT THE ARCHITECT DESIRED THAT OTIS ELEVATORS BE USED AND THAT THE SPECIFICATIONS RELATING TO THE ELEVATORS WERE PREPARED BY REPRESENTATIVES OF THE OTIS COMPANY. THE BOARD FURTHER STATES: "* * * WE BELIEVE THAT THE PURPOSE OF BOTH THE ARCHITECT AND OTIS WAS TO INSURE.

B-141932, MAY 2, 1960

TO SMITH, SWIFT, CURRIE, MCGHEE AND HANCOCK:

WE REFER AGAIN TO YOUR LETTER OF FEBRUARY 5, 1960, WITH ENCLOSURE, PROTESTING, ON BEHALF OF A. C. SAMFORD, INC., ALBANY, GEORGIA, AGAINST THE RESTRICTIVE NATURE OF THE SPECIFICATIONS APPLICABLE TO ELEVATORS TO BE INSTALLED IN THE ANDERSON MEMORIAL HOSPITAL, ANDERSON, SOUTH CAROLINA, IN CONNECTION WITH PUBLIC HEATH SERVICE PROJECT NO. SC-147, INVOLVING THE USE OF FEDERAL ASSISTANCE FUNDS UNDER THE HILL-BURTON ACT, AS AMENDED, 42 U.S.C. 291.

THE PRIME CONTRACT FOR THE PROJECT WAS AWARDED, AFTER ADVERTISING, TO THE LOWEST RESPONSIBLE BIDDER, A. C. SAMFORD, INC., ON JUNE 5, 1959. APPARENTLY SAMFORD CONTEMPLATED THE USE OF ELEVATOR EQUIPMENT MANUFACTURED BY THE MONARCH ELEVATOR AND MACHINE COMPANY, BUT IT DOES NOT APPEAR THAT ITS BID WAS EXPRESSLY LIMITED TO THAT EQUIPMENT OR THAT IT INDICATED ANY EXCEPTION TO THE SPECIFICATIONS. AFTER AWARD OF THE PRIME CONTRACT, SAMFORD WAS ADVISED THAT IN THE VIEW OF THE SUPERVISING ARCHITECT THE MONARCH EQUIPMENT WOULD NOT MEET THE SPECIFICATIONS AND, THEREFORE, WAS NOT ACCEPTABLE. UNDER THE PROVISIONS OF THE CONTRACT THE MATTER WAS SUBMITTED TO ARBITRATION. THE ARBITRATION BOARD DECISION, A COPY OF WHICH WAS ENCLOSED WITH YOUR LETTER, STATES THAT THE EVIDENCE DISCLOSED THAT THE ARCHITECT DESIRED THAT OTIS ELEVATORS BE USED AND THAT THE SPECIFICATIONS RELATING TO THE ELEVATORS WERE PREPARED BY REPRESENTATIVES OF THE OTIS COMPANY. THE BOARD FURTHER STATES:

"* * * WE BELIEVE THAT THE PURPOSE OF BOTH THE ARCHITECT AND OTIS WAS TO INSURE, IN SO FAR AS COULD BE DONE BY THE SPECIFICATIONS, THAT NO ELEVATOR OTHER THAN OTIS COULD QUALIFY. * * *"

FINALLY, TWO OF THE THREE MEMBERS OF THE BOARD STATED THEIR CONCLUSION THAT, WITH RESPECT TO THE ELEVATORS,"COMPETITION WAS EITHER WHOLLY ELIMINATED OR CLOSELY RESTRICTED.' THE BOARD, HOWEVER, ALSO FOUND THAT IT WAS NOT AUTHORIZED TO OVERRULE THE DECISION OF THE ARCHITECT AGAINST THE ACCEPTABILITY OF THE MONARCH ELEVATOR AND, THEREFORE, FOUND AGAINST THE CONTENTION THAT THE CONTRACTOR SHOULD EITHER BE PERMITTED TO INSTALL MONARCH ELEVATORS OR BE COMPENSATED FOR THE ADDITIONAL COST INVOLVED IN THE USE OF OTIS ELEVATORS.

IN VIEW OF THE FOREGOING YOU REQUEST OUR VIEWS AS TO WHETHER A VIOLATION OF FEDERAL REGULATIONS OR PROCEDURES HAS OCCURRED.

THE SPECIFICATIONS PROVIDE IN PART (SECTION 39 A-11):

"ELEVATOR CONTRACTOR'S ELIGIBILITY: THE SUBCONTRACTOR FOR THE WORK AND EQUIPMENT INCLUDED UNDER THIS SECTION, HEREINAFTER CALLED "THE ELEVATOR CONTRACTOR," SHALL BE ONE REGULARLY ENGAGED IN THE BUSINESS OF MANUFACTURING, INSTALLING AND SERVICING ELEVATORS AND ESCALATORS OF THE TYPE AND CHARACTER REQUIRED BY THESE SPECIFICATIONS, AND, IN THE INTEREST OF UNIFIED RESPONSIBILITY, HE SHALL BE THE MANUFACTURER OF THE ENTIRE MACHINES, MOTOR, MOTOR GENERATOR SET, CONTROLLERS AND ALL OTHER PARTS OF THE ELEVATOR OPERATING EQUIPMENT, INCLUDING THE DOOR OPERATING MECHANISM AND SIGNAL SYSTEMS, AND OF ALL THE MECHANISMS CONSTITUTING THE VARIOUS ELECTRICAL AND MECHANICAL SAFETY SYSTEM.'

SECTION 39 A-13 PROVIDES FURTHER:

"ELEVATORS: BASE BID SHALL INCLUDE ELEVATORS AS MANUFACTURED BY OTIS ELEVATOR COMPANY OR WESTINGHOUSE ELECTRIC CORPORATION. ELEVATORS OF OTHER MANUFACTURERS WHICH ARE PROPOSED AS GENERALLY MEETING THESE SPECIFICATIONS MAY BE SUBMITTED FOR APPROVAL, STATING THE EXCEPTIONS FROM THESE SPECIFICATIONS AND THE AMOUNT OF DIFFERENCE IN PRICE, IF ANY, AFFECTED BY THEIR USE.'

ALSO, INCORPORATED IN THE SPECIFICATIONS WERE THE GENERAL CONDITIONS PARAGRAPH 39 (C) OF WHICH STATES THAT:

"REFERENCE IN THE SPECIFICATIONS TO ANY ARTICLE, DEVICE, PRODUCT, MATERIAL, FIXTURE, FORM OR TYPE OF CONSTRUCTION BY NAME, MAKE OR CATALOG NUMBER SHALL BE INTERPRETED AS ESTABLISHING A STANDARD OF QUALITY, AND SHALL NOT BE CONSTRUED AS LIMITING COMPETITION. THE CONTRACTOR IN SUCH INSTANCES MAY, AT HIS OPTION, USE ANY ARTICLE, DEVICE, PRODUCT, MATERIAL, FIXTURE, FORM, OR TYPE OF CONSTRUCTION WHICH, IN THE JUDGMENT OF THE ARCHITECT, EXPRESSED IN WRITING, IS EQUAL TO THAT SPECIFIED.'

THE ACTING SURGEON GENERAL, IN A LETTER OF APRIL 4, STATES:

"ALTHOUGH THE BOARD OF ARBITRATORS WAS OF THE VIEW THAT THE SPECIFICATIONS FOR THE ELEVATORS WERE PREPARED BY OTIS REPRESENTATIVES AND WERE DRAWN TO INSURE SO FAR AS COULD BE DONE BY SPECIFICATIONS THAT NO ELEVATOR OTHER THAN OTIS COULD QUALIFY, THE SPECIFICATIONS ON THEIR FACE AND CONSIDERED IN THEIR ENTIRETY WOULD NOT APPEAR TO BE SO RESTRICTIVE. MOREOVER, WE ARE INFORMED THAT SEVERAL ESTABLISHED ELEVATOR MANUFACTURERS IN ADDITION TO OTIS AND WESTINGHOUSE COULD MEET THE SPECIFICATIONS.

"AS NOTED ABOVE, OUR REGULATIONS REQUIRE COMPETITIVE BIDING ONLY ON GENERAL CONTRACTS AND THE COMPETITIVE BIDDING REQUIREMENTS FOR SUCH CONTRACTS ARE MET BY CIRCULARIZING THREE OR MORE BIDDERS. THE GENERAL CONTRACT WAS AWARDED TO A. C. SAMFORD, INC. AND APPARENTLY NO ONE IS PROTESTING THE AWARD OF THE CONTRACT TO SAMFORD.

"UNDER THE CIRCUMSTANCES, IT IS OUR VIEW THAT THE FACTS IN THIS CASE DO NOT INDICATE SUCH FAILURE OF THE PROJECT SPONSOR TO COMPLY WITH THE ACT AND REGULATIONS AS WOULD JUSTIFY INVOKING THE WITHHOLDING PROCEDURES OF SECTION 632 (A) OF THE ACT.

"AS INDICATED IN OUR MEMORANDUM OF MARCH 15, 1960, WE RECENTLY ADVISED OUR STAFF TO EXERCISE CAUTION IN REVIEWING SPECIFICATIONS TO ASSURE THE NONRESTRICTIVE NATURE OF SUCH SPECIFICATIONS.'

AS STATED, THE PROJECT WAS APPROVED BY THE PUBLIC HEALTH SERVICE FOR FEDERAL ASSISTANCE UNDER THE HILL-BURTON ACT, AS AMENDED, 42 U.S.C. 291. WHILE THE ACT ITSELF CONTAINS NO LIMITATION WITH RESPECT TO THE MANNER OF AWARD OF CONTRACTS FOR PROJECTS GRANTED FEDERAL ASSISTANCE THEREUNDER, 42 U.S.C. 291E PROVIDES FOR THE PROMULGATION OF THE REGULATIONS BY THE PUBLIC HEALTH SERVICE. SECTION 53.127 (C) OF THE PUBLIC HEALTH SERVICE REGULATIONS REQUIRES ASSURANCE FROM THE SPONSOR:

"/1) THAT ACTUAL CONSTRUCTION WORK WILL BE PERFORMED BY THE LUMP SUM (FIXED PRICE) CONTRACT METHOD, THAT ADEQUATE METHODS OF OBTAINING COMPETITIVE BIDDING WILL BE OR HAVE BEEN EMPLOYED PRIOR TO AWARDING THE CONSTRUCTION CONTRACT, EITHER BY PUBLIC ADVERTISING OR CIRCULARIZING THREE OR MORE BIDDERS, AND THAT THE AWARD OF A CONTRACT WILL BE OR HAS BEEN MADE TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID. * * *"

WE UNDERSTAND IT TO BE YOUR POSITION THAT THE PREREQUISITE TO "ELEVATOR CONTRACTOR" ELIGIBILITY STATED IN SECTION 39 A-11--- THAT SUCH CONTRACTOR MUST BE THE MANUFACTURER OF THE ENTIRE MACHINES, MOTOR, MOTOR GENERATOR SET, AND OTHER DESIGNATED COMPONENTS OF THE ELEVATOR MECHANISM--- IN PRACTICAL EFFECT ELIMINATES FROM COMPETITION ALL ELEVATOR MANUFACTURERS EXCEPT THOSE DESIGNATED IN SECTION 39 A 13. THE GENERAL RULE APPLICABLE TO COMPETITIVE FEDERAL PROCUREMENTS IS THAT SPECIFICATIONS SHOULD BE STATED IN THE BROADEST POSSIBLE TERMS CONSISTENT WITH THE NEEDS OF THE USING AGENCY. 32 COMP. GEN. 384. HOWEVER, WHEN NECESSARY TO SERVE THE INTERESTS OF THE USING AGENCY, PROCUREMENTS MAY BE LIMITED TO THOSE SUPPLIERS MEETING SPECIALIZED EXPERIENCE OR RELATED REQUIREMENTS. COMP. GEN. 196. IN THE CASE OF THE USUAL GOVERNMENT PROCUREMENT THE DETERMINATION THAT SUCH NECESSITY EXISTS IS PRIMARILY WITHIN THE PROVINCE OF THE PROCURING AGENCY AND MAY BE QUESTIONED BY OUR OFFICE ONLY WHERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. 38 COMP. GEN. 190. WITH RESPECT TO PROCUREMENTS OF THE TYPE HERE UNDER CONSIDERATION, WE THINK THAT THE HOSPITAL STANDS IN THE POSITION OF THE PROCURING AGENCY. SEE B-131443, JUNE 19, 1957. THE HOSPITAL IS NOT A FEDERAL AGENCY, AND FEDERAL FUNDS ARE INVOLVED IN THE CONSTRUCTION PROJECT ONLY TO THE EXTENT APPROVED BY THE SURGEON GENERAL, WITHIN THE LIMITS AUTHORIZED BY THE ACT. THE AMOUNT OF THE FEDERAL GRANT IS NOT NECESSARILY AFFECTED BY INCREASED EXPENDITURES BY THE HOSPITAL, AND THE ONLY REQUIREMENT FOR THE USE OF COMPETITIVE BIDDING PROCEDURES IS THAT IMPOSED BY THE SURGEON GENERAL'S REGULATION. THE ACT IMPOSES UPON THE SURGEON GENERAL THE DUTY OF APPROVING HOSPITAL CONSTRUCTION PROJECTS UPON HIS FINDING THAT THE CONDITIONS PRESCRIBED IN 42 U.S.C. 291H--- INCLUDING "THAT THE PLANS AND SPECIFICATIONS ARE IN ACCORD WITH THE REGULATIONS PRESCRIBED PURSUANT TO SECTION 291E OF THIS TITLE"--- ARE MET. IN THESE CIRCUMSTANCES, WHILE WE HAVE PREVIOUSLY EXPRESSED THE OPINION THAT THE "COMPETITIVE BIDDING" REQUIRED BY THE REGULATION WAS INTENDED TO ENCOMPASS THE PRINCIPLES AND PROCEDURES OF COMPETITIVE BIDDING FOLLOWED BY FEDERAL AGENCIES, WE MUST RECOGNIZE THE PRIMARY AUTHORITY OF THE SURGEON GENERAL TO DETERMINE COMPLIANCE WITH THE REGULATIONS IMPOSED BY HIM.

THE ONLY REMEDY FOR VIOLATION OR BREACH OF THE REQUIREMENTS OF THE STATUTE OR REGULATIONS, BY A SPONSOR OF AN APPROVED PROJECT, IS THAT PROVIDED IN 42 U.S.C. 291J, AS FOLLOWS:

"WHENEVER THE SURGEON GENERAL, AFTER REASONABLE NOTICE AND OPPORTUNITY FOR HEARING TO THE STATE AGENCY * * * FINDS THAT THE STATE AGENCY IS NOT COMPLYING SUBSTANTIALLY WITH THE PROVISIONS REQUIRED * * * BY REGULATIONS PRESCRIBED PURSUANT TO SECTION 291E OF THIS TITLE * * * THE SURGEON GENERAL MAY FORTHWITH NOTIFY THE SECRETARY OF THE TREASURY AND THE STATE AGENCY THAT NO FURTHER CERTIFICATION WILL BE MADE UNDER SECTIONS 291A- 291C, SECTIONS 291D-291H, 291P-291R, OR 291S 291V OF THIS TITLE * * * OR THAT NO FURTHER CERTIFICATIONS WILL BE MADE FOR ANY PROJECT OR PROJECTS DESIGNATED BY THE SURGEON GENERAL AS BEING AFFECTED BY THE DEFAULT, AS THE SURGEON GENERAL MAY DETERMINE TO BE APPROPRIATE UNDER THE CIRCUMSTANCES; AND * * * HE MAY WITHHOLD FURTHER CERTIFICATIONS UNTIL THERE IS NO LONGER ANY FAILURE TO COMPLY * * *.'

IT WILL BE NOTED THAT THE QUOTED PROVISION PERMITS THE WITHHOLDING OF CERTIFYING ACTION AT THE DISCRETION OF THE SURGEON GENERAL; IT DOES NOT REQUIRE SUCH ACTION EVEN IF IT IS FOUND THAT THE REGULATIONS HAVE BEEN BREACHED. AS NOTED ABOVE, THE ACTING SURGEON GENERAL HAS CONCLUDED THAT THE CIRCUMSTANCES OF THE PRESENT CASE DO NOT JUSTIFY INVOKING THE WITHHOLDING PROCEDURES. ACCORDINGLY, IRRESPECTIVE OF WHETHER THE LIMITATION EXPRESSED IN SECTION 39 A-11 OF THE SPECIFICATIONS MAY BE REGARDED ULTIMATELY AS REASONABLY RELATED TO THE PURPOSES OF THE PROCUREMENT, IT DOES NOT APPEAR THAT OUR OFFICE WOULD BE WARRANTED IN ATTEMPTING ANY ACTION WITH RESPECT TO THE INSTANT MATTER. WITH RESPECT TO FUTURE PROCUREMENTS, THE ACTING SURGEON GENERAL ADVISED IN THE MEMORANDUM OF MARCH 15, 1960, CITED IN HIS LETTER OF APRIL 4, THAT THE PUBLIC HEALTH SERVICE REGIONAL STAFF HAS BEEN ADVISED TO EXERCISE GREATER CAUTION IN REVIEWING SPECIFICATIONS TO ASSURE THAT THEY ARE NOT RESTRICTIVE.