B-151759, NOV. 13, 1963

B-151759: Nov 13, 1963

Additional Materials:

Contact:

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

 

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

INC.: FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE ACTION TAKEN BY FORT SILL. WERE AWARDED CONTRACT NO. UNDER THE TERMS OF THE CONTRACT LABORERS WERE TO BE FURNISHED AT $1.00 PER HOUR AND SUPERVISORS AT $1.295 PER HOUR. A. THIS CONTRACT IS RENEWABLE. THAT THE CONTRACTING OFFICER SHALL HAVE GIVEN PRELIMINARY NOTICE OF THE GOVERNMENT'S INTENTION TO RENEW AT LEAST SIXTY (60) DAYS BEFORE THIS CONTRACT IS TO EXPIRE. (SUCH PRELIMINARY NOTICE WILL NOT BE DEEMED TO COMMIT THE GOVERNMENT TO RENEWAL). B. THE CONTRACTOR MAY REFUSE RENEWAL OF THE CONTRACT BY GIVING THE CONTRACTING OFFICER A WRITTEN NOTICE TO THE EFFECT THAT SUCH RENEWAL WILL NOT BE ACCEPTED. 1963 PERFORMANCE UNDER THE CONTRACT WAS TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT EFFECTIVE AT THE CLOSE OF BUSINESS ON JANUARY 31.

B-151759, NOV. 13, 1963

TO CITYWIDE JANITORIAL SERVICE, INC.:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE ACTION TAKEN BY FORT SILL, OKLAHOMA, IN ADVERTISING FOR A CONTRACT FOR KITCHEN POLICE SERVICE FOR THE FISCAL YEAR 1964 RATHER THAN NEGOTIATING WITH YOU AS TO PRICE AND EXERCISING AN OPTION TO RENEW YOUR CONTRACT FOR SUCH SERVICES FOR THE FISCAL YEAR 1963 FOR THE ADDITIONAL YEAR.

THE RECORD SHOWS THAT ON JUNE 11, 1962, IRA GELBER AND CITYWIDE JANITORIAL SERVICE, INC., WERE AWARDED CONTRACT NO. DA34-031-AIV-2274 FOR FURNISHING KITCHEN POLICE SERVICE FOR THE PERIOD JULY 1, 1962 THROUGH JUNE 30, 1963 AT FORT SILL, OKLAHOMA. UNDER THE TERMS OF THE CONTRACT LABORERS WERE TO BE FURNISHED AT $1.00 PER HOUR AND SUPERVISORS AT $1.295 PER HOUR. PARAGRAPH 8 OF THE SPECIAL PROVISIONS OF THE CONTRACT PROVIDED AS FOLLOWS:

"8. OPTION TO EXTEND THE TERM OF THE CONTRACT.

A. THIS CONTRACT IS RENEWABLE, AT THE OPTION OF THE GOVERNMENT, BY THE CONTRACTING OFFICER GIVING WRITTEN NOTICE OF RENEWAL TO THE CONTRACTOR WITHIN THE PERIOD SPECIFIED IN THE SCHEDULE; PROVIDED, THAT THE CONTRACTING OFFICER SHALL HAVE GIVEN PRELIMINARY NOTICE OF THE GOVERNMENT'S INTENTION TO RENEW AT LEAST SIXTY (60) DAYS BEFORE THIS CONTRACT IS TO EXPIRE. (SUCH PRELIMINARY NOTICE WILL NOT BE DEEMED TO COMMIT THE GOVERNMENT TO RENEWAL). IF THE GOVERNMENT EXERCISES THIS OPTION FOR RENEWAL, THE CONTRACT AS RENEWED SHALL BE DEEMED TO INCLUDE THIS OPTION PROVISION. HOWEVER, THE TOTAL DURATION OF THIS CONTRACT, INCLUDING THE EXERCISE OF ANY OPTIONS UNDER THIS CLAUSE, SHALL NOT EXCEED THREE (3) YEARS.

B. THE CONTRACTOR MAY REFUSE RENEWAL OF THE CONTRACT BY GIVING THE CONTRACTING OFFICER A WRITTEN NOTICE TO THE EFFECT THAT SUCH RENEWAL WILL NOT BE ACCEPTED, AND THE CONTRACTOR AGREES TO GIVE SUCH NOTICE AT LEAST ONE HUNDRED AND TWENTY (120) DAYS PRIOR TO THE END OF THE CURRENT CONTRACT PERIOD.'

BY LETTER DATED JANUARY 21, 1963 PERFORMANCE UNDER THE CONTRACT WAS TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT EFFECTIVE AT THE CLOSE OF BUSINESS ON JANUARY 31, 1963. SUBSEQUENTLY, THE GOVERNMENT DESIRED TO REINSTATE THE TERMINATED CONTRACT AND NEGOTIATIONS IN THIS REGARD WERE UNDERTAKEN WITH YOU CULMINATING IN A SUPPLEMENTAL AGREEMENT TO THE CONTRACT DATED APRIL 30, 1963, WHEREIN YOU AGREED TO RESUME PERFORMANCE UNTIL JUNE 30, 1963, AND TO WAIVE ALL CLAIMS AGAINST THE GOVERNMENT BY REASON OF THE TERMINATION.

BY LETTER DATED APRIL 30, 1963, THE CONTRACTING OFFICER GAVE YOU THE OFFICIAL PRELIMINARY NOTICE OF THE GOVERNMENT'S INTENT TO EXERCISE THE OPTION TO EXTEND THE TERM OF THE CONTRACT THROUGH JUNE 30, 1964, PURSUANT TO SPECIAL CONDITION 8 QUOTED ABOVE, SUBJECT TO APPROVAL BY HIGHER HEADQUARTERS AND AVAILABILITY OF FISCAL YEAR 1964 FUNDS. IT IS TO BE NOTED THAT SPECIAL CONDITION 8 SPECIFICALLY PROVIDES "SUCH PRELIMINARY NOTICE WILL NOT BE DEEMED TO COMMIT THE GOVERNMENT TO RENEWAL.'

YOU CONTEND THAT ONE OF THE PRIMARY REASONS WHY YOU AGREED TO THE REINSTATEMENT OF THE TERMINATED CONTRACT FOR THE TWO-MONTH PERIOD, AND TO THE WAIVER OF ALL CLAIMS AGAINST THE GOVERNMENT DUE TO THE TERMINATION, WAS THAT YOU FELT ASSURED THAT THE CONTRACT WOULD BE EXTENDED TO JUNE 30, 1964, AND THAT YOU WOULD BE ABLE TO FURNISH SUCH SERVICES FOR A TOTAL OF 14 MONTHS RATHER THAN FOR ONLY THE MONTHS OF MAY AND JUNE 1963.

THE CONTRACTING OFFICIALS REPORTED THAT WHEN YOU WERE NOTIFIED ON APRIL 10, 1963, THAT THE GOVERNMENT WAS INTERESTED IN REINSTATING THE CONTRACT AND YOU WERE ASKED IF YOU COULD PERFORM THE SERVICES, YOU WERE ADVISED THAT THE REINSTATEMENT WOULD BE EFFECTIVE ONLY UNTIL JUNE 30, 1963 AND THAT THE NEGOTIATION FOR AN EXTENSION OF THE CONTRACT TERM WOULD BE CONDUCTED AT A LATER DATE AND WOULD IN NO WAY BE CONNECTED WITH THE REINSTATEMENT. DURING SUBSEQUENT NEGOTIATION, YOU WERE ADVISED THAT THE GOVERNMENT INTENDED TO EXERCISE ITS OPTION TO EXTEND THE CONTRACT FOR THE FISCAL YEAR 1964 PROVIDED THE EXERCISE OF THE OPTION WAS ADVANTAGEOUS TO THE GOVERNMENT. IT IS ALSO REPORTED THAT DURING SUCH NEGOTIATIONS YOU WERE ADVISED THAT FORT SILL PERSONNEL WERE INQUIRING INTO THE APPLICABILITY OF THE FAIR LABOR STANDARDS ACT AND A POSSIBILITY EXISTED THAT THE CONTRACT FOR THE FISCAL YEAR 1964 WOULD BE COVERED BY THE FAIR LABOR STANDARDS ACT, AND THAT YOU WOULD BE NOTIFIED AS SOON AS THE INFORMATION BECAME AVAILABLE. THE NOTICE OF INTENT TO EXTEND THE CONTRACT FOR THE FISCAL YEAR 1964 WAS ISSUED PRIOR TO THE RECEIPT OF A RULING ON THE APPLICABILITY OF THE FAIR LABOR STANDARDS ACT ONLY BECAUSE THE EXISTING CONTRACT REQUIRED AT LEAST 60 DAYS WRITTEN NOTICE OF THE INTENT TO RENEW PRIOR TO JUNE 30, 1963.

IT IS REPORTED THAT WHILE A LETTER FROM THE UNITED STATES DEPARTMENT OF LABOR STATING THAT K.P. SERVICE AT FORT SILL WOULD BE SUBJECT TO THE FAIR LABOR STANDARDS ACT WAS RECEIVED IN THE PURCHASING AND CONTRACTING OFFICE AT FORT SILL ON APRIL 26, 1963, IT WAS NOT BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER OR THE OTHER GOVERNMENT PERSONNEL ENGAGED IN THE NEGOTIATION WITH YOU UNTIL AFTER YOUR REPRESENTATIVES HAD DEPARTED FROM FORT SILL ON APRIL 30, 1963. HEADQUARTERS, FOURTH UNITED STATES ARMY WAS THEN CONTACTED TO VERIFY THE INFORMATION GIVEN AND THE FOURTH UNITED STATES ARMY ADVISED THAT THE FAIR LABOR STANDARDS ACT DID APPLY TO K.P. SERVICE.

BY LETTERS DATED MAY 9 AND 11, 1963, YOU WERE ADVISED THAT THE K.P. SERVICES WERE SUBJECT TO PROVISIONS OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, AND THE NEW WORK HOURS ACT OF 1962, AND THEREFORE THAT "ANY EXTENSION OF THE CONTRACT PERIOD UNDER THE RENEWAL OPTION PROVISIONS WILL INCLUDE THE ABOVE ACTS.' APPARENTLY YOU WERE ADVISED EARLIER BY TELEPHONE TO THE SAME EFFECT. IN THE LETTER OF MAY 11, YOU WERE REQUESTED TO FURNISH "A FIRM HOURLY RATE FOR LABORERS AND SUPERVISORS FOR CONSIDERATION IN EXERCISING THE RENEWAL OPTION PROVISIONS OF THE CONTRACT.' ON MAY 17 YOU WERE ADVISED BY TELEPHONE THAT YOUR PROPOSAL WAS URGENTLY NEEDED DUE TO THE SHORT TIME AVAILABLE TO COMPARE OTHER PROPOSALS WITH MARKET PRICES AND YOU WERE URGED TO SUBMIT A REALISTIC PROPOSAL. MAY 21, 1963, YOU ADVISED FORT SILL BY TELEPHONE THAT YOUR PROPOSAL WAS BEING MAILED AND THAT THE RATES WERE $1.796 PER HOUR FOR LABORERS AND $2.74 FOR SUPERVISORS.

IN THE MEANWHILE THE CONTRACTING OFFICER LEARNED THAT FORT BLISS, TEXAS, HAD FORMALLY ADVERTISED FOR A K.P. SERVICE CONTRACT AND HAD RECEIVED PRICES OF $1.35 PER HOUR FOR LABORERS AND $1.39 PER HOUR FOR SUPERVISORS. IN VIEW THEREOF, HE DETERMINED THAT FORT BLISS HAD TESTED THE MARKET AND THAT A PRICE OF APPROXIMATELY $1.40 PER HOUR WOULD BE FAIR AND REASONABLE. UPON RECEIVING YOUR PROPOSED PRICES OF $1.796 AND $2.74 PER HOUR IT WAS DETERMINED THAT SUCH PRICES WERE SO FAR OUT OF LINE WITH KNOWN MARKET PRICES THAT FURTHER NEGOTIATIONS WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT. ACCORDINGLY, AND IN VIEW OF THE SHORT TIME BEFORE SUCH SERVICES WERE TO START, THE CONTRACTING OFFICER DIRECTED THAT THE K.P. SERVICES BE IMMEDIATELY FORMALLY ADVERTISED, AND IN ACCORDANCE THEREWITH INVITATION FOR BIDS NO. AIV-34-031-63-A AND MS-107 WAS ISSUED ON MAY 22, 1963, PROVIDING FOR BIDS TO BE RECEIVED AND OPENED IN JUNE 7, 1963.

YOUR LETTER OF MAY 21, 1963, CONFIRMING THE RATES GIVEN BY TELEPHONE, WAS ACKNOWLEDGED ON MAY 23 AND YOU WERE ADVISED THAT IT WOULD BE NECESSARY TO FORMALLY ADVERTISE FOR THE K.P. SERVICE AS A METHOD OF TESTING THE MARKET TO DETERMINE WHETHER THE PRICES OFFERED BY YOU WOULD BE THE BEST PRICES AVAILABLE AND THAT A COPY OF THE INVITATION FOR BIDS HAD BEEN FORWARDED TO YOU UNDER SEPARATE COVER. UPON RECEIPT OF SAID LETTER YOU WENT TO FORT SILL TO DISCUSS THE MATTER AND BY LETTER DATED JUNE 4 YOU SUBMITTED A REVISED PROPOSAL OF $1.495 PER HOUR FOR LABORERS AND $1.845 FOR SUPERVISORS, AND REQUESTED IMMEDIATE CONSIDERATION AND REPLY PRIOR TO THE DATE SET FOR THE OPENING OF THE BIDS. THE REVISED PROPOSAL WAS REJECTED AND YOU WERE URGED TO SUBMITA BID UNDER THE FORMAL INVITATION FOR BIDS.

NINE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION AND THEY WERE OPENED ON JUNE 7, 1963, AS SCHEDULED. YOU QUOTED PRICES OF $1.44 PERHOUR FOR LABORERS AND $1.50 PER HOUR FOR SUPERVISORS. THE LOW RESPONSIVE AND RESPONSIBLE BID WAS RECEIVED FROM HORNE AND SMITH COMPANY OF $1.40 PER HOUR FOR BOTH LABORERS AND SUPERVISORS.

THE FACTS REPORTED BY THE ADMINISTRATIVE OFFICE AS SET FORTH ABOVE, DO NOT APPEAR TO SUPPORT YOUR CONTENTION THAT THE GOVERNMENT WOULD EXERCISE THE OPTION TO EXTEND THE FISCAL YEAR 1963 CONTRACT REGARDLESS, OR THAT AN EXTENSION OF THE CONTRACT WAS HELD OUT AS AN INDUCEMENT FOR YOU TO REINSTATE THE CONTRACT FOR THE MONTHS OF MAY AND JUNE 1963. RATHER IT APPEARS THAT THE REINSTATEMENT AND THE RENEWAL WERE CONSIDERED AS ENTIRELY SEPARATE ACTIONS AND THAT THE CONTRACTING OFFICER INTENDED TO EXERCISE THE OPTION TO EXTEND THE CONTRACT ONLY PROVIDED YOUR PROPOSED RATES WERE CONSIDERED REASONABLE. IN VIEW OF THE RATES PROPOSED IN YOUR LETTER OF MAY 21, 1963, AND THE FACT THAT IT WAS STATED THAT THE PROPOSED RATES WERE BASED UPON A LESSER PERCENTAGE FOR OVERHEAD AND PROFIT THAN YOU WERE REALIZING UNDER THE CURRENT CONTRACT, WE FIND NO BASIS TO QUESTION THE CONTRACTING OFFICER'S DETERMINATION THAT FURTHER NEGOTIATION WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT AND THAT THE K.P. SERVICE REQUIREMENTS FOR THE FISCAL YEAR 1964 SHOULD BE FORMALLY ADVERTISED.

IN OUR VIEW, THE OPTION PROVISION OF SECTION 8 OF YOUR CONTRACT CONTEMPLATED RENEWALS ON THE IDENTICAL TERMS AND PRICES AS THOSE OF THE ORIGINAL CONTRACT. OTHERWISE THE OPTION WAS MEANINGLESS, SINCE IT STATED NO OTHER TERMS OR PRICES, AND ANY DIFFERENT TERMS OR PRICES WOULD HAVE HAD TO BE SUBJECT TO MUTUAL AGREEMENT. WE THEREFORE CONCLUDE THAT THE CONTRACTING OFFICER'S ATTEMPT TO NEGOTIATE NEW RATES WITH YOU AMOUNTED TO AN UNAUTHORIZED SOLE SOURCE NEGOTIATION FOR A NEW CONTRACT, AND THAT ANY CONTRACT WHICH MIGHT HAVE BEEN AWARDED TO YOU ON THAT BASIS WOULD HAVE BEEN OF DOUBTFUL VALIDITY.

IT APPEARS TO HAVE BEEN THE CONTRACTING OFFICER'S BELIEF, BECAUSE THE LABOR DEPARTMENT ADVISED THAT ANY NEW OR RENEWAL CONTRACT WOULD BE SUBJECT TO THE MINIMUM WAGE AND OVERTIME REQUIREMENTS OF THE FAIR LABOR STANDARDS ACT, AS AMENDED, AND THE WORK HOURS ACT OF 1962, THAT YOU COULD NOT HAVE BEEN REQUIRED BY EXERCISE OF THE OPTION TO PERFORM THE CONTRACT SERVICES FOR ANOTHER YEAR AT THE ORIGINAL CONTRACT RATES.

INSOFAR AS THE WORK HOURS ACT OF 1962--- P.L. 87-581--- IS INVOLVED, IT IS OUR VIEW THAT SECTION 204 OF THAT ACT, WHICH PROVIDES THAT IT SHOULD NOT AFFECT ANY CONTRACT EXISTING ON ITS EFFECTIVE DATE(OCTOBER 12, 1962) PRECLUDES THE APPLICABILITY OF THE ACT TO A RENEWAL OR EXTENSION OF AN EXISTING CONTRACT BY THE EXERCISE OF A RIGHT OR OPTION RESERVED BY THE GOVERNMENT TO RENEW OR EXTEND SUCH CONTRACT UPON TERMS FULLY FIXED BY THE EXISTING CONTRACT WITHOUT REFERENCE TO THE CONTRACTOR'S CONSENT TO SUCH RENEWAL OR EXTENSION. SEE B-151068, APRIL 8, 1963, 42 COMP. GEN. - . WE THEREFORE DO NOT AGREE WITH THE POSITION OF THE DEPARTMENT OF LABOR THAT THE REQUIREMENTS OF THE ACT WOULD HAVE BEEN APPLICABLE TO A RENEWAL OF YOUR CONTRACT ON ITS ORIGINAL TERMS PURSUANT TO THE GOVERNMENT'S OPTION.

HOWEVER, IN VIEW OF THE DETERMINATION BY THE DEPARTMENT OF LABOR THAT WORK UNDER A NEW OR RENEWAL CONTRACT WOULD BE SUBJECT TO THE MINIMUM WAGE REQUIREMENTS OF THE FAIR LABOR STANDARDS ACT, AS AMENDED, AND SINCE IT APPEARS THAT UNDER THAT ACT YOU WOULD HAVE BEEN REQUIRED TO PAY WORKERS EMPLOYED ON THE CONTRACT WORK AT RATES IN EXCESS OF THE RATES RECEIVED BY YOU FROM THE GOVERNMENT, WE ARE NOT REQUIRED TO OBJECT TO THE DECISION OF THE CONTRACTING OFFICER NOT TO ATTEMPT TO EXERCISE THE OPTION AT THE ORIGINAL RATES.

WE DO NOT UNDERSTAND IT TO BE YOUR CONTENTION THAT THE ALLEGED AGREEMENT AT THE TIME THE 1962 CONTRACT WAS REINSTATED WAS THAT IT WOULD BE RENEWED AT THE PRIOR RATES. SINCE NO OTHER RATES WERE AGREED UPON ANY AGREEMENT TO RENEW WOULD HAVE BEEN VOID FOR INDEFINITENESS.