B-145598, JANUARY 31, 1962, 41 COMP. GEN. 484

B-145598, JANUARY 31, 1962, 41 COMP. GEN. 484

CONTRACTS - NEGOTIATION - PROPRIETY A DETERMINATION TO NEGOTIATE A CONSTRUCTION CONTRACT FOR THE RENOVATION OF A BUILDING WITH A CONTRACTOR WHO WAS PERFORMING OTHER WORK AT THE SAME LOCATION BASED ON THE CONCLUSIONS THAT THE PLANS AND SPECIFICATIONS DID NOT SHOW ALL UNKNOWN CONDITIONS, THAT OTHER BIDDERS WITHOUT SPECIAL KNOWLEDGE OF THE SITE MIGHT INCLUDE FACTORS TO PROTECT THEMSELVES FROM UNCERTAIN CONDITIONS, THEREBY INCREASING THE COSTS, OR MIGHT FAIL TO INCLUDE CONTINGENCY FACTORS RESULTING IN DELAYS OR INFERIOR WORK, AND THAT THE PARTICULAR CONTRACTOR OFFERED THE GREATEST ASSURANCE THAT THE WORK WOULD MEET THE TECHNICAL AND TIME REQUIREMENTS IS A DETERMINATION BASED ON CONCLUSIONS WHICH DO NOT JUSTIFY EITHER THE FAILURE TO OBTAIN COMPETITIVE BIDS OR THE NEGOTIATION OF THE CONTRACT UNDER THE ADVERTISING EXCEPTION IN 10 U.S.C. 2304 (A) (10) FOR PROCUREMENTS WHEN IT IS IMPRACTICABLE TO OBTAIN COMPETITION.

TO THE SECRETARY OF THE NAVY, JANUARY 31, 1962:

UNDER DATE OF AUGUST 10, 1961, WE FORWARDED A COPY OF A LETTER DATED JULY 27, 1961, FROM THE HONORABLE HUBERT H. HUMPHREY, WHICH QUESTIONED THE ACTION OF YOUR DEPARTMENT IN NEGOTIATING WITH BALTIMORE CONTRACTORS, INCORPORATED, ON A NONCOMPETITIVE BASIS FOR CERTAIN REHABILITATION WORK ON BANCROFT HALL, U.S. NAVAL ACADEMY, AT A COST OF $5,950,000. IN VIEW THEREOF WE REQUESTED A COMPLETE REPORT IN THE MATTER, INCLUDING A COPY OF THE CONTRACT IN QUESTION, A DETAILED STATEMENT OF ANY JUSTIFICATION FOR FAILURE TO OBTAIN COMPETITION, COPIES OF DOCUMENTS PERTINENT TO SUCH JUSTIFICATION, AND A DESCRIPTION OF ANY SIMILAR WORK AT THE NAVAL ACADEMY WHICH IT WAS THEN PLANNED TO AWARD ON A NONCOMPETITIVE BASIS. UNDER DATE OF SEPTEMBER 15, 1961, AND BY WAY OF REPLY TO OUR REQUEST, THE ASSISTANT SECRETARY, INSTALLATIONS AND LOGISTICS, FORWARDED A COPY OF CHANGE P TO CONTRACT NO. NBY-13499 WITH BALTIMORE CONTRACTORS, TOGETHER WITH A COPY OF A LETTER FROM THE ASSISTANT SECRETARY DATED MAY 10, 1961, TO THE CHAIRMAN, HOUSE ARMED SERVICES COMMITTEE, SETTING OUT CERTAIN JUSTIFICATIONS FOR AWARDING A NEGOTIATED CONTRACT IN LIEU OF REQUESTING COMPETITIVE BIDS BY FORMAL ADVERTISING.

OUR REVIEW OF THESE DOCUMENTS, PLUS OUR REVIEW OF VARIOUS OTHER RECORDS OF YOUR DEPARTMENT RELATIVE TO THIS PROCUREMENT, INDICATES THAT CHANGE P TO CONTRACT NO. NBY-13499 WAS NEGOTIATED UNDER THE PROVISIONS OF 10 U.S.C. 2304 (A) (10), WHICH AUTHORIZE NEGOTIATION IN LIEU OF FORMAL ADVERTISING IF "THE PURCHASE OR CONTRACT IS FOR PROPERTY OR SERVICES FOR WHICH IT IS IMPRACTICABLE TO OBTAIN COMPETITION.' THE DETERMINATION AND FINDINGS, WHICH ARE REQUIRED BY ARMED SERVICES PROCUREMENT REGULATIONS, PARAGRAPH 3- 210 IN SUPPORT OF NEGOTIATION UNDER THIS AUTHORITY, READ AS FOLLOWS:

UPON THE BASIS OF THE FACTS RECITED BELOW, IT IS DETERMINED THAT THE PROPOSED CONTRACT MAY BE NEGOTIATED WITHOUT FORMAL ADVERTISING PURSUANT TO 10 U.S.C. 2304 (A) (10).

FACTS

THE INSTANT WORK COVERS THE REHABILITATION OF WINGS 4 AND 6 OF BANCROFT HALL, U.S. NAVAL ACADEMY, ANNAPOLIS, MARYLAND WHICH ENCOMPASSES THE REMOVAL AND REPLACEMENT OF OBSOLETE STRUCTURAL, ELECTRICAL, AND PLUMBING AND MECHANICAL FEATURES WITHIN PRECISE TIME LIMITS TO AVOID ANY INTERRUPTION OF THE ACADEMIC SCHEDULE OF THE NAVAL ACADEMY WHICH CANNOT BE TOLERATED. COMPETITION IS IMPRACTICABLE IN THE INSTANT CASE AND THEREFORE THE SUBJECT WORK IS BEING ADDED BY CHANGE ORDER TO THIS CONTRACT, NBY- 13499, UNDER WHICH THE CONTRACTOR IS CONSTRUCTING ADDITIONAL WINGS TO BANCROFT HALL ( WINGS 7 AND 8) WHICH ARE CONTIGUOUS TO THE INSTANT WORK.

THE PHRASE "PRECISE TIME LIMITS" USED ABOVE APPARENTLY REFERS TO THE SCHEDULE WORKED OUT BY ACADEMY OFFICIALS FOR THE COMPLETE REHABILITATION OF BANCROFT HALL, AND THE RELOCATION OF LIVING QUARTERS OF THE MIDSHIPMEN IN CONSONANCE WITH THE PROGRESS OF REHABILITATION WORK. ESSENTIALLY, THE RELOCATION PLANNING IS BASED ON MOVING THE MIDSHIPMEN QUARTERED IN THE FIRST WING TO BE REHABILITATED TO ONE OF THE NEWLY CONSTRUCTED WINGS. THEN, WHEN THE WORK HAS PROGRESSED TO THE POINT WHERE THE REHABILITATED WING COULD BE OCCUPIED, THE MIDSHIPMEN QUARTERED IN THE SECOND WING TO BE REHABILITATED ARE TO BE MOVED TO THE NEWLY REHABILITATED WING. A SIMILAR SERIES OF MOVES IS CONTEMPLATED FOR EACH INCREMENT UNTIL ALL SIX OF THE EXISTING WINGS ARE REHABILITATED. EACH MOVE WILL INVOLVE ABOUT ONE-SIXTH OF THE MIDSHIPMEN OR APPROXIMATELY 500-600 MEN. ALL OF THE MOVES HAVE BEEN PLANNED TO MINIMIZE INTERRUPTIONS TO THE NORMAL ROUTINE OF THE ACADEMIC PERIODS BY HAVING THE MIDSHIPMEN MOVE INTO THEIR RELOCATED QUARTERS UPON RETURN FROM THEIR ABSENCE FROM THE ACADEMY FOR SUMMER CRUISES AND HOLIDAYS.

AS INDICATED BY THE FOREGOING, AND AS SUMMARIZED IN THE ASSISTANT SECRETARY'S LETTER OF MAY 10, 1961, THE DETERMINATION TO NEGOTIATE THIS PROCUREMENT AND TO LIMIT SUCH NEGOTIATION TO BALTIMORE CONTRACTORS WAS BASED UPON FOUR FACTORS. FIRST, A BELIEF THAT THE PLANS AND SPECIFICATIONS WERE ,FAIRLY COMPLETE," BUT THAT SUCH PLANS AND SPECIFICATIONS DID NOT FULLY DELINEATE ALL AREAS OR OBVIATE ALL UNCERTAINTIES AND THAT IT WAS IMPOSSIBLE TO DO SO. SECOND, CONCERN THAT A SATISFACTORY BID COULD NOT BE OBTAINED BY FORMAL ADVERTISING BECAUSE A RESPONSIBLE CONTRACTOR WITHOUT SPECIAL KNOWLEDGE OF THE SITE MIGHT INCLUDE IN HIS BID SUFFICIENT AND SIGNIFICANT CONTINGENCY FACTORS TO PROTECT HIMSELF AGAINST HIDDEN OR BURIED CONDITIONS, THUS INCREASING THE COST TO THE GOVERNMENT. THIRD, CONCERN THAT THE LOW BIDDER UNDER FORMAL ADVERTISING PROCEDURES, THROUGH LACK OF SPECIAL KNOWLEDGE OF THE SITE, MIGHT NOT INCLUDE SUCH CONTINGENCY FACTORS IN HIS BID PRICE, MIGHT FIND HIMSELF OPERATING AT A LOSS, AND MIGHT, THEREFORE, RESORT TO ECONOMIES THROUGHOUT THE REMAINDER OF THE JOB WHICH COULD RESULT IN DELAY AND INFERIOR WORKMANSHIP. FOURTH, A BELIEF THAT AN AWARD TO BALTIMORE CONTRACTORS, BECAUSE OF THEIR AVAILABILITY ON THE SITE AND THEIR FAMILIARITY WITH BANCROFT HALL AND THE OPERATIONS OF THE NAVAL ACADEMY, OFFERED THE GREATEST ASSURANCE THAT THE TECHNICAL AND SCHEDULING REQUIREMENTS OF THE PROJECT WOULD BE MET.

WITH RESPECT TO WHETHER THE PLANS AND SPECIFICATIONS WERE SUFFICIENTLY COMPLETE TO BE USED IN THE SOLICITATION OF COMPETITIVE BIDS, OUR REVIEW INDICATES THEY WERE PREPARED BY THE GEORGE M. EWING COMPANY UNDER ARCHITECT-ENGINEER CONTRACT NO. NBY-27745. UNDER THE PROVISIONS OF THIS CONTRACT THE CONTRACTOR WAS REQUIRED TO PREPARE PLANS AND SPECIFICATIONS "AS MAY BE REQUIRED FOR THE RENOVATION OF BANCROFT HALL BY A COMPETITIVE BIDDING TYPE OF CONSTRUCTION CONTRACT.' WE HAVE FOUND NO EVIDENCE OF A FORMAL FINDING BY YOUR DEPARTMENT THAT THE CONTRACTOR HAS FAILED TO FULFILL ITS OBLIGATION UNDER THIS CONTRACT. CONVERSELY, THE SPECIFICATIONS WERE ORIGINALLY INCLUDED IN AN INVITATION FOR BIDS WHICH PROVIDED FOR BID OPENING ON MARCH 29, 1961, AND IT WAS THE OPINION OF THE ARCHITECT-ENGINEER, AS INDICATED BY ITS " AGENDA FOR MEETING SCHEDULED FOR MAY 8, 1961, IN CONNECTION WITH COST ESTIMATE FOR FIRST INCREMENT," THAT A CONTRACT COULD BE LET ON THE BASIS OF COMPETITIVE BIDDING.

THE ADVISABILITY OF SUBMITTING THE PLANS AND SPECIFICATIONS TO COMPETITIVE BIDDING, AND AWARDING A CONTRACT TO THE LOW RESPONSIBLE BIDDER, APPEARS TO HAVE BEEN FIRST QUESTIONED ON MARCH 7, 1961, BY THE OFFICER IN CHARGE OF CONSTRUCTION, CHESAPEAKE, IN A MEMORANDUM TO THE CHIEF, BUREAU OF YARDS AND DOCKS, WHICH STATED, IN PERTINENT PART, AS FOLLOWS:

2. IT MUST BE RECOGNIZED THAT THE WORK TO BE ACCOMPLISHED IS NOT AN ORDINARY REHABILITATION PROJECT BUT INSTEAD EMBODIES MANY UNUSUAL AND UNIQUE FEATURES REQUIRING SPECIAL DEMANDS UPON A CONTRACTOR TO TIME OR PHASE HIS WORK IN REMOVING AND REPLACING OBSOLETE AND OUTMODED STRUCTURAL, ELECTRICAL, PLUMBING AND MECHANICAL FEATURES WITHIN PRECISE TIME LIMITS TO MEET THREE SEPARATE COMPLETION DATES. THE PRESENT PLANS AND SPECIFICATIONS ARE DEFINITIVE TO THE EXTENT FEASIBLE. HOWEVER, ALL FACTORS CONSIDERED, THE DETAILED PLANS AND SPECIFICATIONS CANNOT EFFECTIVELY STATE THE MANY UNKNOWN, HIDDEN, OR BURIED CONSTRUCTION FEATURES PRESENTLY EMBODIED IN THE EXISTING STRUCTURES TO BE REHABILITATED. THESE STRUCTURES HAVE BEEN MODIFIED OVER THE YEARS THROUGH MULTIPLE PHYSICAL CHANGES ACCOMPLISHED THROUGH CIVIL SERVICE FORCES AND CONTRACT. SUCH STRUCTURAL CHANGES AND ALTERATIONS HAVE RESULTED IN MANY VARIED FEATURES OF CONSTRUCTION EXISTING BEHIND THE PRESENT WALLS.

3. IT IS IMPERATIVE THAT A CONTRACTOR WHO CAN SATISFACTORILY PERFORM THE INSTANT WORK MUST HAVE A PROVEN EFFICIENCY FOR SIMILAR REHABILITATION WORK TOGETHER WITH A PACE OF OPERATION THAT WILL PROVIDE A COMPLETELY REHABILITATED STRUCTURE WITHIN THE PRECISE TIME LIMITS PRESCRIBED. THE ACADEMIC SCHEDULE FOR THE NAVAL ACADEMY CANNOT BE INTERRUPTED, CHANGED OR OTHERWISE VARIED WITHOUT DETRIMENTAL EFFECTS AND EXTENSIVE COSTS BEING INCURRED BY THE GOVERNMENT.

4. TO PLACE THE INSTANT WORK ON THE MARKET FOR UNRESTRICTED COMPETITIVE BIDDING IS NOT CONSISTENT, ALL FACTORS CONSIDERED, WITH THE BEST INTERESTS OF THE NAVY AND THE EVENTUAL OVERALL COSTS TO THE GOVERNMENT. WHILE IT IS RECOGNIZED THAT THE LOWEST STARTING PRICE WOULD PROBABLY BE SHOWN, NEVERTHELESS THERE IS NO ASSURANCE THAT A REAL UNDERSTANDING OF THE WORK, THE SPEED OF ACCOMPLISHMENT AND THE ESSENTIAL CONTINUITY NECESSARY TO EFFECTIVELY COMPLETE THE WORK WITHIN THE LIMITS PRESCRIBED WOULD BE ACHIEVED.

5. IT IS BELIEVED THAT THE ONLY FEASIBLE PROCEDURE IS TO SELECT A SPECIALLY QUALIFIED CONTRACTOR BY ONE OF THE FOLLOWING METHODS:

A. INTERVIEW A LIMITED NUMBER OF ESPECIALLY QUALIFIED FIRMS AND MAKE A SELECTION ON THE BASIS OF THE FIRM BEST QUALIFIED AT THE TIME TO PERFORM THIS WORK, TAKING INTO CONSIDERATION FAMILIARITY WITH THIS TYPE OF WORK AND PERFORMANCE OF THE PARTICULAR FIRM. AFTER SUCH SELECTION, THEN ISSUE A LETTER CONTRACT AUTHORIZING THE CONTRACTOR TO PROCEED AND THEREAFTER NEGOTIATING A FIRM LUMP SUM PRICE AS SOON AS FEASIBLE.

B. NEGOTIATE A CHANGE ORDER WITH THE FIRM PRESENTLY CONSTRUCTING WINGS 7 AND 8 OF BANCROFT HALL UNDER CONTRACT NBY-13499.

THESE RECOMMENDATIONS APPEAR TO HAVE BEEN ADOPTED IN PART IN A MEMORANDUM DATED MARCH 10, 1961, FROM THE CHIEF, BUREAU OF YARDS AND DOCKS, TO THE ASSISTANT SECRETARY, INSTALLATIONS AND LOGISTICS, WHICH READS AS FOLLOWS:

3. HOWEVER, AFTER LONG AND CAREFUL STUDY AND CONSULTATION, I HAVE BEEN FORCED TO CONCLUDE THAT IT WOULD NOT BE IN THE BEST INTERESTS OF THE NAVY TO ADVERTISE AND BID THIS PROJECT. THE PLANS AND SPECIFICATIONS ARE FAIRLY COMPLETE, BUT THE NATURE OF LARGE SCALE REHABILITATION WORK IS SUCH THAT IT IS IMPOSSIBLE TO DELINEATE THE AREAS AND DEFINE THE QUANTITIES WITH THE SAME FINALITY AS CAN BE ACHIEVED ON OTHER TYPES OF CONSTRUCTION PROJECTS. THIS SITUATION IS COMPOUNDED IN A STRUCTURE AS OLD AS BANCROFT HALL WHICH HAS UNDERGONE MULTIPLE CHANGES AND ALTERATIONS OVER THE YEARS. RESPONSIBLE CONTRACTORS WILL NECESSARILY INCLUDE IN THEIR BIDS SIZEABLE CONTINGENCY FACTORS TO PROTECT THEM AGAINST UNKNOWN, HIDDEN OR BURIED CONDITIONS WHICH WILL REQUIRE EXTENSIVE AND COSTLY TREATMENT WHEN UNCOVERED.

4. OF EQUAL CONCERN, IS THE FACT THAT THE EXTREMELY TIGHT CONSTRUCTION SCHEDULE FOR THIS PROJECT CANNOT BE MET EXCEPT BY A CONTRACTOR WHO HAS SOLID EXPERIENCE IN THIS TYPE OF WORK, PROVEN KNOWHOW AND AN ORGANIZATION FAMILIAR WITH THE PARTICULAR SITE AND ITS REQUIREMENTS. COMPETITIVE BIDDING WITH SUCH SAFEGUARDS AS ARE PERMISSIBLE MIGHT YIELD A GENERALLY COMPETENT AND FINANCIALLY RESPONSIBLE FIRM, BUT THERE IS NO REASON TO BELIEVE THAT IT WOULD AFFORD THE EXCEPTIONAL QUALIFICATIONS REQUIRED IN THE INSTANT CASE. THIS IS A RISK WHICH THE NAVY CANNOT AFFORD BECAUSE AN INTERRUPTION TO THE ACADEMIC SCHEDULE OF THE NAVAL ACADEMY WOULD BE WELL- NIGH DISASTROUS. THE LOGICAL SOLUTION IS TO SELECT THAT FIRM WHICH IS FROM ALL VIEWPOINTS MOST CERTAIN TO MEET THESE MANIFOLD REQUIREMENTS.

5. BALTIMORE CONTRACTORS, INC. IS NOW COMPLETING A SIZEABLE PROJECT FOR THE CONSTRUCTION OF ADDITIONAL WINGS ON BANCROFT HALL. IT IS A LARGE AND EXPERIENCED ORGANIZATION WHICH HAS ACQUIRED AN INTIMATE KNOWLEDGE OF THE SUBJECT PREMISES DURING ITS 23 MONTHS ON THE CONSTRUCTION JOB. BEING PRESENTLY MOBILIZED ON THE SITE WITH MEN AND EQUIPMENT, IT COULD BEGIN WORK IMMEDIATELY AND SAVE THE 6 TO 8 WEEKS WHICH WOULD BE REQUIRED FOR ADVERTISING A COMPETITIVE BID PROJECT.

6. MY OFFICER IN CHARGE OF CONSTRUCTION FOR THE CHESAPEAKE AREA ADVISES ME THAT HIS FIRM HAS BEEN REASONABLE AND COOPERATIVE IN THE PRICING OF CHANGE ORDERS UNDER THEIR PRESENT CONTRACT AND I AM CONFIDENT THAT WE COULD NEGOTIATE A FAIR AND EQUITABLE PRICE WITH THEM FOR THIS NEW WORK.

7. I HAVE THEREFORE CONCLUDED THAT IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO DISPENSE WITH COMPETITIVE BIDDING AND TO AWARD THE SUBJECT WORK TO BALTIMORE CONTRACTORS, INC. AS A CHANGE ORDER TO THEIR PRESENT CONTRACT. IT IS MY UNDERSTANDING THAT YOU CONCUR IN THIS POSITION, AND I SHALL PROCEED ON THAT UNDERSTANDING FORTHWITH UNLESS I AM ADVISED TO THE CONTRARY.

FROM THE FOREGOING IT WOULD APPEAR THAT THE AWARD OF THE REHABILITATION WORK ON WINGS 4 AND 6 TO BALTIMORE CONTRACTORS PRESENTS TWO PRIMARY QUESTIONS. FIRST, WHETHER THE FACTS AND CIRCUMSTANCES WERE SUCH AS TO REQUIRE COMPETITIVE BIDDING UNDER FORMAL ADVERTISING. SECOND, IF FORMAL ADVERTISING WAS NOT REQUIRED, WHETHER IT WAS PROPER TO NEGOTIATE WITH BALTIMORE CONTRACTORS ON A NONCOMPETITIVE BASIS.

AS INDICATED ABOVE, THE PLANS AND SPECIFICATIONS PREPARED BY THE GEORGE M. EWING COMPANY APPEAR TO HAVE BEEN ACCEPTED BY YOUR DEPARTMENT AS DEFINITIVE AND COMPLETE TO THE EXTENT PRACTICABLE UNDER THE CIRCUMSTANCES. THERE IS NO REQUIREMENT THAT COMPETITIVE BIDDING BE BASED UPON PLANS AND SPECIFICATIONS WHICH STATE THE WORK REQUIREMENTS IN SUCH DETAIL AS TO ELIMINATE ALL POSSIBILITY THAT THE SUCCESSFUL BIDDER WILL ENCOUNTER CONDITIONS OR BE REQUIRED TO PERFORM WORK OTHER THAN THAT SPECIFIED IN DETAIL IN THE PLANS AND SPECIFICATIONS. SUCH PERFECTION, WHILE DESIRABLE, IS MANIFESTLY IMPRACTICABLE IN SOME ADVERTISED PROCUREMENTS, AND THE PLANS AND SPECIFICATIONS FOR CONSTRUCTION OR REHABILITATION CONTRACTS, WHICH NORMALLY MAY BE EXPECTED TO INVOLVE SUBSURFACE WORK OR HIDDEN CONDITIONS, ARE PARTICULARLY SUSCEPTIBLE TO DEFECTS OF THIS NATURE. WHETHER PROVISION IS MADE IN AN ADVERTISED INVITATION AND RESULTING CONTRACT FOR THE COST OF ADDITIONAL WORK RESULTING FROM UNKNOWN CONDITIONS TO BE BORNE BY THE GOVERNMENT BY CHANGE ORDER TO THE CONTRACT, OR WHETHER BIDS ARE SOLICITED AND CONTRACTS AWARDED ON A BASIS WHICH WILL REQUIRE THE BIDDER TO PERFORM ALL WORK AT THE BID PRICE REGARDLESS OF THE CONDITIONS ENCOUNTERED, IS WITHIN THE DISCRETION OF THE CONTRACTING AGENCY. HOWEVER, WHERE THE PLANS AND SPECIFICATIONS ARE SUFFICIENTLY COMPLETE TO PERMIT BIDDING ON AN EQUAL COMPETITIVE BASIS, A POSSIBILITY THAT HIDDEN OR UNKNOWN CONDITIONS MAY EXIST AND PROVE SUCH PLANS AND SPECIFICATIONS TO BE INCOMPLETE DOES NOT IN ITSELF JUSTIFY A FAILURE TO OBTAIN FOR THE GOVERNMENT THE BENEFITS OF FULL AND FREE COMPETITION BY SUBMITTING SUCH PLANS AND SPECIFICATIONS TO COMPETITIVE BIDDING.

WHERE COMPETITIVE BIDS ARE SOLICITED UNDER CONDITIONS BY WHICH THE CONTRACTING AGENCY EITHER EXPRESSLY OR IMPLIEDLY WARRANTS THE COMPLETENESS AND ACCURACY OF THE PLANS AND SPECIFICATIONS, OR PROVIDES FOR ADJUSTMENT IN THE CONTRACT PRICE FOR ADDITIONAL WORK RESULTING FROM CHANGED OR UNKNOWN CONDITIONS, AND THUS ASSUMES LIABILITY TO PAY AN AMOUNT OVER AND ABOVE THE BID AND CONTRACT PRICE FOR ANY WORK NOT SPECIFIED IN OR CONTEMPLATED BY THE PLANS AND SPECIFICATIONS, THE PROBLEM OF INFLATED BID PRICES RESULTING FROM THE ADDITION OF AMOUNTS TO COVER CONTINGENCIES, AS WELL AS THE POSSIBILITY OF INADEQUATE BID PRICES RESULTING FROM FAILURE TO INCLUDE AMOUNTS TO COVER CONTINGENCIES, WOULD APPEAR TO BE, FOR ALL PRACTICAL PURPOSES, NONEXISTENT. IN THIS CONNECTION WE NOTE THAT SECTION 3.1 OF THE SPECIFICATIONS APPLICABLE TO CHANGE P, UNDER WHICH BALTIMORE CONTRACTORS WILL PERFORM THE WORK, SPECIFICALLY PROVIDES FOR ADJUSTMENT IN THE CONTRACT PRICE IF ELEVATIONS OR OBSTRUCTIONS ENCOUNTERED IN THE EARTHWORK DIFFER MATERIALLY FROM THOSE SHOWN ON THE PLANS. FURTHER, THE STANDARD PROVISIONS OF STANDARD FORM 23A AND NAVDOCKS 113 RELATIVE TO CHANGED CONDITIONS AND OMISSIONS AND MISDESCRIPTIONS IN THE SPECIFICATIONS AND DRAWINGS, WHICH APPLY TO THE CONSTRUCTION OF NEW WINGS 7 AND 8, ARE ALSO MADE APPLICABLE TO CHANGE P.

IN THE ABSENCE OF EITHER A WARRANTY AS TO THE ACCURACY AND COMPLETENESS OF THE PLANS AND SPECIFICATIONS OR EXPRESS PROVISION FOR ADJUSTMENT IN THE CONTRACT PRICE FOR ADDITIONAL WORK RESULTING FROM CHANGED OR UNKNOWN CONDITIONS, THE POSSIBILITY OF RECEIVING BOTH INFLATED AND INADEQUATE BID PRICES IS ALWAYS PRESENT. HOWEVER, WE ARE AWARE OF NO SOUND BASIS UPON WHICH IT MAY BE CONTENDED THAT THE POSSIBILITY OF RECEIVING SOME BID PRICES CONTAINING CONTINGENCY ALLOWANCES WHICH MAY LATER PROVE TO BE EXCESSIVE, AND OTHER BID PRICES CONTAINING CONTINGENCY ALLOWANCES WHICH MAY LATER PROVE TO BE INADEQUATE, CONSTITUTES A JUSTIFICATION FOR FAILING TO SUBMIT THE PROCUREMENT TO COMPETITIVE BIDDING. IN THE EVENT ALL BIDS ARE CONSIDERED EXCESSIVE THEY MAY, OF COURSE, BE REJECTED, IN WHICH EVENT SPECIFIC AND ADEQUATE AUTHORITY EXISTS UNDER 10 U.S.C. 2304 (A) (15) TO NEGOTIATE A FAIR PRICE TO THE GOVERNMENT. CONVERSELY, IN THE EVENT A BID IS RECEIVED FROM A RESPONSIBLE BIDDER IN AN AMOUNT WHICH THE CONTRACTING AGENCY CONSIDERS IMPROVIDENT, IT WOULD APPEAR TO BE INCUMBENT UPON THE CONTRACTING AGENCY TO VERIFY THE BID PRICE AND, IN THE ABSENCE OF SUCH ERROR AS WOULD JUSTIFY ITS REJECTION, TO ACCEPT SUCH BID AND TO PROTECT THE INTERESTS OF THE GOVERNMENT BY VIGILANT INSPECTION AND SUPERVISION OF THE WORK TO ASSURE THAT THE QUALITY OF BOTH MATERIALS AND WORKMANSHIP IS IN ACCORD WITH THE CONTRACT REQUIREMENTS.

THERE REMAINS FOR CONSIDERATION WHETHER THE BELIEF OF YOUR DEPARTMENT THAT AN AWARD TO BALTIMORE CONTRACTORS OFFERED THE BEST ASSURANCE THAT THE TECHNICAL AND SCHEDULING DEMANDS OF THE PROJECT WOULD BE MET, CONSTITUTES A SUFFICIENT JUSTIFICATION FOR FAILING TO OBTAIN COMPETITIVE BIDS AND FOR NEGOTIATING ON A SOLE-SOURCE BASIS UNDER 10 U.S.C. 2304 (A) (10). THE BASES FOR SUCH BELIEF APPEAR TO BE FULLY SET OUT IN THE PORTIONS OF THE MEMORANDA QUOTED ABOVE. THEY INCLUDE CONCLUSIONS THAT BALTIMORE CONTRACTORS IS A LARGE EXPERIENCED ORGANIZATION; IS FINANCIALLY CAPABLE AND WELL QUALIFIED TO PERFORM THE WORK, IS MOBILIZED AT THE SITE AND ABLE TO IMMEDIATELY COMMENCE THE WORK; HAVE MANIFESTED A PERFORMANCE THAT IS CONSISTENT WITH THE NEEDS OF THE PROJECT; HAVE BEEN COOPERATIVE AND HAVE DEMONSTRATED EXTENSIVE ABILITY TO MEET SCHEDULES ON THE SAME GENERAL TYPE OF WORK; THAT THE CONSTRUCTION SCHEDULE COULD NOT BE MET EXCEPT BY A CONTRACTOR WHO HAS SOLID EXPERIENCE IN THE TYPE OF WORK, PROVEN KNOWHOW, AND AN ORGANIZATION FAMILIAR WITH THE PARTICULAR SITE AND ITS REQUIREMENTS; AND THAT THERE WAS NO REASON TO BELIEVE THAT COMPETITIVE BIDDING (WITH ITS REQUIREMENT FOR AWARD TO THE LOW RESPONSIBLE BIDDER) WOULD AFFORD THE EXCEPTIONAL QUALIFICATIONS REQUIRED IN THE INSTANT CASE. IT IS OUR OPINION THAT NONE OF THESE CONCLUSIONS, STANDING ALONE, JUSTIFIES EITHER THE FAILURE TO OBTAIN COMPETITIVE BIDS OR THE DETERMINATIONS TO NEGOTIATE UNDER 10 U.S.C. 2304 (A) (10). COLLECTIVELY, THEY WOULD APPEAR TO INDICATE A BELIEF BY YOUR DEPARTMENT THAT BALTIMORE CONTRACTORS COULD PROPERLY BE CONSIDERED THE MOST HIGHLY QUALIFIED CONTRACTOR TO PERFORM THE WORK IN ACCORDANCE WITH THE PLANS, SPECIFICATIONS, AND SCHEDULES; THAT THE NATURE OF THE WORK WAS SUCH AS TO JUSTIFY AN AWARD TO THE MOST HIGHLY QUALIFIED CONTRACTOR; AND THAT THE LACK OF ASSURANCE OF AN AWARD TO BALTIMORE CONTRACTORS UNDER COMPETITIVE BIDDING PROCEDURES JUSTIFIED NEGOTIATION WITH BALTIMORE CONTRACTORS ONLY.

WHETHER BALTIMORE CONTRACTORS IS, IN FACT, THE FIRM MOST HIGHLY QUALIFIED TO PERFORM THE REHABILITATION WORK ON WINGS 4 AND 6 WOULD APPEAR TO BE CONJECTURAL. IN THIS CONNECTION, WE NOTE THAT PARAGRAPH 1.44 OF SECTION 1 --- GENERAL CLAUSES, OF THE PLANS AND SPECIFICATIONS AS ORIGINALLY PREPARED FOR THE SOLICITATION OF COMPETITIVE BIDS AND NOW INCORPORATED INTO CHANGE P TO CONTRACT NBY-13499, READS AS FOLLOWS:

1.44 QUALIFICATIONS OF BIDDERS.--- EACH BIDDER SHALL SUBMIT WITH HIS BID WRITTEN DATA DEMONSTRATING THAT SUCH BIDDER HAS WITHIN THE PAST 5 YEARS SATISFACTORILY COMPLETED MAJOR REHABILITATION WORK IN CONNECTION WITH A NATIONAL SHRINE OR MUSEUM OR SIMILAR HISTORICAL, PUBLIC STRUCTURE, LARGE HOTEL OR HOSPITAL WHICH INCLUDES WORK INVOLVING RENOVATION, RESTORATION AND PRESERVATION OF SUCH ANTIQUE FEATURES; FOR EXAMPLE, THE HIGHLY ORNATE GRANITE EXTERIOR WALLS AND APPURTENANCES OF BANCROFT HALL; IN WORK INVOLVING REPLACEMENT OF HIGHLY COMPLICATED AND INVOLVED UTILITY SYSTEMS AND EQUIPMENT. THE DATA SHALL INDICATE, ALSO, EXPERIENCE WITH STRUCTURAL REPAIR WORK ON ANTIQUE HISTORICAL OR PUBLIC STRUCTURES, HOTELS OR HOSPITALS DEMONSTRATING KNOWLEDGE AND CAPACITY TO PERFORM WORK ON OUTMODED STRUCTURAL SYSTEMS COMPARABLE TO THE TYPE OF FLOOR CONSTRUCTION OF WING 4, KNOWN AS THE " COLUMBIAN SYSTEM OF FIREPROOFING" AND THERE SHALL ALSO BE INCLUDED PROOF OF PREVIOUS MANAGEMENT EXPERIENCE AND WORK COORDINATION CAPABILITIES INVOLVING REHABILITATION OF STRUCTURES UNDER A CONTRACT IN THE APPROXIMATE MAGNITUDE OF THREE MILLION DOLLARS OR TO DEMONSTRATE CAPABILITIES OF MEETING THE REQUIRED COMPLETION SCHEDULES HEREIN. EACH BIDDER SHALL SUBMIT THIS DATA WITH HIS BID AND FAILURE TO SUBMIT REQUIRED DATA SHALL BE CAUSE FOR REJECTION OF THE BID.

WE FIND NO EVIDENCE OF A DETERMINATION BY YOUR DEPARTMENT THAT BALTIMORE CONTRACTORS MEETS, OR FAILS TO MEET, SUCH QUALIFICATIONS. NEITHER DOES IT APPEAR TO BE BEYOND QUESTION THAT THE EXPERIENCE OF BALTIMORE CONTRACTORS DURING THE PAST SEVERAL YEARS IN CONSTRUCTING NEW WINGS 7 AND 8 WOULD PROVIDE ANY SPECIAL KNOWLEDGE OF THE OLD WINGS TO BE REHABILITATED WHICH WOULD REVEAL POTENTIAL HIDDEN OR BURIED CONDITIONS THAT MIGHT BE ENCOUNTERED DURING THE COURSE OF REHABILITATION. WHILE IT IS APPARENT THAT THE CONSTRUCTION OF WINGS 7 AND 8 HAS GIVEN BALTIMORE CONTRACTORS KNOWLEDGE OF, AND FAMILIARITY WITH, GENERAL WORKING CONDITIONS AND WORK REQUIREMENTS AT THE ACADEMY, IT WOULD APPEAR THAT SUCH KNOWLEDGE IS SHARED BY OTHER CONTRACTORS WHO HAVE PERFORMED CONSTRUCTION AND REHABILITATION WORK AT THE ACADEMY DURING THE PAST SEVERAL YEARS. THE RULE, THAT CONCLUSIONS OR OPINIONS OF CONTRACTING OFFICERS ON THE AVAILABILITY OF QUALIFIED BIDDERS OR THE BID PRICES WHICH MAY BE EXPECTED MAY NOT BE ACCEPTED AS CONTROLLING PRIOR TO THE SOLICITATION OF BIDS, IS WELL ESTABLISHED AND HAS BEEN REPEATEDLY INVOKED BY THIS OFFICE. SEE 16 COMP. GEN. 318; 23 ID. 395; 30 ID. 34; 37 ID. 524; 39 ID. 566.

HOWEVER, EVEN IF IT IS ASSUMED THAT BALTIMORE CONTRACTORS IS THE MOST HIGHLY QUALIFIED FIRM TO PERFORM THE WORK, THE QUESTION REMAINS WHETHER ANY AUTHORITY EXISTS TO INSURE THAT IT WILL BE AWARDED A CONTRACT BY DENYING OTHER FIRMS THE OPPORTUNITY TO COMPETE. IN THIS CONNECTION IT WOULD APPEAR TO BE ESPECIALLY PERTINENT TO NOTE THAT H.R. 1366, 80TH CONGRESS, WHICH SUBSEQUENTLY WAS ENACTED AS THE ARMED SERVICES PROCUREMENT ACT OF 1947, 10 U.S.C. 2301, ET SEQ., ORIGINALLY INCLUDED, AS SECTION 1 (XII), A REQUEST FOR AUTHORITY TO NEGOTIATE UNDER THE FOLLOWING CIRCUMSTANCES:

(XII) FOR SUPPLIES OR SERVICES AS TO WHICH THE AGENCY HEAD DETERMINES THAT ADVERTISING AND COMPETITIVE BIDDING WOULD NOT SECURE SUPPLIES OR SERVICES OF A QUALITY SHOWN TO BE NECESSARY IN THE INTEREST OF THE GOVERNMENT.

AS PASSED BY THE HOUSE OF REPRESENTATIVES, H.R. 1366 INCLUDED THIS AUTHORITY, AND THE NECESSITY AND JUSTIFICATION FOR ITS ENACTMENT BY THE SENATE WAS PRESENTED TO THE SENATE COMMITTEE ON ARMED SERVICES BY THE ASSISTANT SECRETARY OF THE NAVY DURING HEARINGS ON JUNE 24, 1947, WITH THE FOLLOWING CONCLUDING STATEMENT:

WHERE QUALITY IS A MATTER OF CRITICAL--- IN MANY CASES LIFE-AND DEATH--- IMPORTANCE, DISCRETION MUST RESIDE IN THE SERVICES TO SELECT SOURCES WHERE EXPERIENCE, EXPERTNESS, KNOW-HOW, FACILITIES AND CAPACITIES ARE BELIEVED TO ASSURE PRODUCTS OF THE REQUISITE QUALITY. WHERE NATIONAL SECURITY OR THE SAFETY AND HEALTH OF PERSONNEL OF THE SERVICES ARE INVOLVED, ANY COMPROMISE OF QUALITY DICTATED BY MANDATORY CONSIDERATIONS OF PRICE WOULD BE INDEFENSIBLE. ( SEE PAGE 15, HEARINGS BEFORE THE COMMITTEE ON ARMED SERVICES, UNITED STATES SENATE, ON H.R. 1366, 80TH CONG.)

NOTWITHSTANDING THE ABOVE, THE SENATE ARMED SERVICES COMMITTEE DELETED THIS PROVISION FROM THE BILL, AND EXPLAINED ITS ACTION AT PAGE 3, SENATE REPORT NO. 571, 80TH CONGRESS, AS FOLLOWS:

THE BILL WAS AMENDED BY DELETING THE AUTHORITY TO NEGOTIATE CONTRACTS FOR THE PURPOSE OF SECURING A PARTICULAR QUALITY OF MATERIALS. YOUR COMMITTEE IS OF THE OPINION THAT THIS SECTION IS OPEN TO CONSIDERABLE ADMINISTRATIVE ABUSE AND WOULD BE EXTREMELY DIFFICULT TO CONTROL. FOR THIS REASON IT HAS BEEN ELIMINATED.

THE REJECTION BY THE CONGRESS OF A REQUEST FOR SPECIFIC AUTHORITY TO NEGOTIATE UNDER STATED CIRCUMSTANCES MUST BE CONSTRUED AS A PROHIBITION AGAINST NEGOTIATION BASED UPON THE EXISTENCE OF SUCH CIRCUMSTANCES. IT IS OUR OPINION THAT THE CIRCUMSTANCES RELIED UPON BY YOUR DEPARTMENT IN NEGOTIATING ONLY WITH BALTIMORE CONTRACTORS ARE SUCH AS TO PLACE THE PROCUREMENT WITHIN THE SCOPE OF THIS PROHIBITION, AND THAT THE FAILURE OF YOUR DEPARTMENT TO SUBMIT THIS PROCUREMENT TO COMPETITIVE BIDDING WAS IMPROPER.

IN VIEW OF THE FOREGOING CONCLUSION, WHETHER CIRCUMSTANCES WERE SUFFICIENT TO JUSTIFY NEGOTIATION ON A NONCOMPETITIVE BASIS BECOMES ACADEMIC. HOWEVER, EVEN IF IT IS ASSUMED THAT IT WAS IMPRACTICABLE TO ADVERTISE, ASPR 1-300.1 DIRECTS THAT "ALL PROCUREMENTS, WHETHER BY FORMAL ADVERTISING OR BY NEGOTIATION, SHALL BE MADE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICABLE EXTENT.' WE SEE NO BASIS, OTHER THAN THE FACT THAT AN AWARD TO BALTIMORE CONTRACTORS MIGHT NOT HAVE BEEN ASSURED UNDER COMPETITIVE NEGOTIATION, FOR CONTENDING THAT IT WOULD HAVE BEEN IMPRACTICABLE TO OBTAIN COMPETITIVE PROPOSALS AND TO NEGOTIATE A CONTRACT BASED UPON SUCH PROPOSALS. ADDITIONALLY, OUR REVIEW INDICATES THAT FUND LIMITATIONS PRECLUDED A CONTRACT AWARD FOR ALL WORK CONTEMPLATED IN THE FIRST INCREMENT. THE SPECIFICATIONS WERE THEREFORE MODIFIED TO REDUCE THE COST, AND ONLY A PORTION OF THE WORK SO MODIFIED WAS INCLUDED IN CHANGE P. THE BALANCE OF THE WORK SO MODIFIED WAS DEFERRED UNTIL ADDITIONAL FUNDS WERE AVAILABLE. THIS WORK WAS THEN INCLUDED IN CHANGE T, WHICH WAS NEGOTIATED WITH BALTIMORE CONSTRUCTORS ON OCTOBER 19, 1961, IN AN AMOUNT OF $1,663.867. THE COST OF THE MODIFIED WORK UNDER CHANGES P AND T, PLUS THE ESTIMATED COST OF THE WORK WHICH WAS NOT INCLUDED IN THOSE CHANGES, IS IN EXCESS OF $800,000 ABOVE THE ARCHITECT-ENGINEER'S ESTIMATED COST FOR THE SAME WORK. IT WAS NOTED THAT ANOTHER ESTIMATE, WHICH WAS SECURED BY THE BUREAU OF YARDS AND DOCKS FROM AN INDEPENDENT ESTIMATING FIRM, DIFFERED BY ONLY ABOUT $30,000, WHEN ADJUSTED FOR OVERHEAD AND PROFIT, FROM THE SUM OF CHANGES P AND T AND THE ESTIMATED COST OF THE WORK EXCLUDED IN THOSE CHANGES. WHILE THIS ESTIMATE COVERED THE WORK CONTEMPLATED BY THE ORIGINAL PLANS AND SPECIFICATIONS AS DRAWN BY THE ARCHITECT ENGINEER, IT WAS BASED UPON PRICES TO BE OBTAINED BY NEGOTIATION, RATHER THAN UPON PRICES TO BE OBTAINED BY COMPETITIVE BIDDING AS WAS THE CASE IN THE ARCHITECT-ENGINEER'S ESTIMATE. THUS, THERE WOULD APPEAR TO BE REASON TO QUESTION WHETHER THE FAILURE TO OBTAIN EITHER COMPETITIVE BIDS OR COMPETITIVE PROPOSALS ADEQUATELY PROTECTED THE INTERESTS OF THE GOVERNMENT FROM THE VIEWPOINT OF PRICE. WHETHER THIS IS IN FACT THE CASE MAY BE DIFFICULT TO ESTABLISH IN VIEW OF THE APPARENT FAILURE OF YOUR DEPARTMENT TO SPECIFY THAT THE EXAMINATION OF RECORDS CLAUSE SHOULD BE APPLICABLE TO CHANGES P AND T. ADDITIONALLY, WE UNDERSTAND THAT THE ORIGINAL PLANS HAVE NOW BEEN AMENDED TO PROVIDE FOR FOUR INCREMENTS INSTEAD OF THREE, AND THAT THE ESTIMATED COST OF ALL WORK UNDER THE FOUR INCREMENTS HAS BEEN INCREASED TO ABOUT $29,000,000. INDICATED BY THE LEGISLATIVE HISTORY OF THE NEGOTIATION AUTHORITY PRESENTLY CONTAINED IN 10 U.S.C. 2304 (A) (10), IT WAS THE INTENT OF CONGRESS THAT THIS OFFICE SHOULD NOT REVERSE "BONA FIDE DETERMINATIONS OF IMPRACTICABILITY WHERE ANY REASONABLE GROUND FOR SUCH DETERMINATION EXISTS.' SEE PAGE 8, SENATE REPORT NO. 571, 80TH CONGRESS. WHILE IT IS OUR OPINION THAT NO "REASONABLE GROUND" HAS BEEN ADVANCED FOR THE FAILURE TO OBTAIN COMPETITION IN THIS PROCUREMENT, IT IS APPARENT THAT THE EXTENT OF PERFORMANCE BY BALTIMORE CONTRACTORS RENDERS ANY CORRECTIVE ACTION IMPRACTICABLE AT THIS LATE DATE. HOWEVER, SINCE WE ARE AWARE OF NO CHANGE IN THE CIRCUMSTANCES WITH RESPECT TO THE SECOND AND SUCCEEDING INCREMENTS WHICH COULD BE CONSIDERED SUFFICIENTLY MATERIAL TO NECESSITATE A CONCLUSION AT VARIANCE WITH OUR OPINIONS ON THE FIRST INCREMENT IT IS RECOMMENDED THAT FULL CONSIDERATION BE GIVEN TO AWARDING CONTRACTS FOR THE SECOND, THIRD, AND FOURTH INCREMENTS ON A COMPETITIVE BASIS. IN THE EVENT OF FAILURE TO FORMALLY ADVERTISE SUCH PROCUREMENTS, THE CIRCUMSTANCES RELIED UPON TO JUSTIFY NEGOTIATION ON EITHER A COMPETITIVE OR NONCOMPETITIVE BASIS SHOULD BE FULLY DOCUMENTED AND COPIES OF SUCH DOCUMENTATION SHOULD IMMEDIATELY BE FORWARDED TO THIS OFFICE.