B-155522, DEC. 1, 1964, 44 COMP. GEN. 320

B-155522: Dec 1, 1964

Additional Materials:

Contact:

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

 

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

CONTRACTS - AWARDS - LABOR SURPLUS AREAS - DETERMINATION - AFTER BID OPENING WHERE UNDER A PARTIAL SMALL BUSINESS SET-ASIDE A SUBSTANTIAL PART OF THE CONTRACT PRICE IS THE CONTEMPLATED PURCHASES OF RAW MATERIAL FROM SUPPLIERS. INFORMATION FURNISHED AFTER BID OPENING INDICATING THE SUPPLIER OF THE BIDDER OFFERING TO PERFORM IN OTHER THAN A LABOR SURPLUS AREA IS LOCATED IN A SUBSTANTIAL LABOR SURPLUS AREA ENTITLES THAT BIDDER UNDER AN INVITATION REQUESTING INFORMATION ON THE PRODUCTION BY BIDDER AND FIRST- TIER SUBCONTRACTORS TO FIRST PRIORITY TO NEGOTIATE FOR THE SET-ASIDE RATHER THAN THE BIDDER PLANNING TO PERFORM IN A PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA BUT WHOSE SUPPLIER IS NOT IN A LABOR SURPLUS AREA.

B-155522, DEC. 1, 1964, 44 COMP. GEN. 320

CONTRACTS - AWARDS - LABOR SURPLUS AREAS - DETERMINATION - AFTER BID OPENING WHERE UNDER A PARTIAL SMALL BUSINESS SET-ASIDE A SUBSTANTIAL PART OF THE CONTRACT PRICE IS THE CONTEMPLATED PURCHASES OF RAW MATERIAL FROM SUPPLIERS, INFORMATION FURNISHED AFTER BID OPENING INDICATING THE SUPPLIER OF THE BIDDER OFFERING TO PERFORM IN OTHER THAN A LABOR SURPLUS AREA IS LOCATED IN A SUBSTANTIAL LABOR SURPLUS AREA ENTITLES THAT BIDDER UNDER AN INVITATION REQUESTING INFORMATION ON THE PRODUCTION BY BIDDER AND FIRST- TIER SUBCONTRACTORS TO FIRST PRIORITY TO NEGOTIATE FOR THE SET-ASIDE RATHER THAN THE BIDDER PLANNING TO PERFORM IN A PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA BUT WHOSE SUPPLIER IS NOT IN A LABOR SURPLUS AREA, THE SUPPLIERS NOT BEING SUBCONTRACTORS THE INFORMATION SUBMITTED AFTER BID OPENING MAY BE CONSIDERED IN DETERMINING WHETHER THE CONTRACT WILL BE PERFORMED IN A LABOR SURPLUS AREA AND, THEREFORE, THE BIDDER WHO ON THE BASIS OF RAW MATERIAL COSTS WILL INCUR A SUBSTANTIAL PART OF THE BID PRICE IN A LABOR SURPLUS AREA QUALIFIES FOR FIRST PRIORITY IN THE NEGOTIATION OF THE SMALL BUSINESS SET-ASIDE.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, DECEMBER 1, 1964:

REFERENCE IS MADE TO LETTER OF NOVEMBER 2, 1964, FROM THE GENERAL COUNSEL, SUBMITTING FOR DECISION A QUESTION WHETHER CENTRAL CHEMICAL CORPORATION OR LEBANON CHEMICAL CORPORATION IS ENTITLED TO FIRST PRIORITY TO NEGOTIATE FOR THE SMALL BUSINESS SET-ASIDE UNDER INVITATION FPNGC-R- 56647/A/9-16-64.

UNDER THE SUBJECT INVITATION THERE IS A PARTIAL SET-ASIDE OF 5 MILLION POUNDS OF DDT, 75 PERCENT WATER DISPERSIBLE POWDER, FOR AWARD TO ONE OR MORE SMALL BUSINESS CONCERNS. NOTICE OF PARTIAL SMALL BUSINESS SET-ASIDE, JULY 1963 GSA FORM 1773, MADE A PART OF THE INVITATION FOR BIDS, STIPULATES THAT NEGOTIATIONS WILL BE CONDUCTED FIRST WITH SMALL BUSINESSES WHICH ARE PERSISTENT LABOR SURPLUS AREA CONCERNS, SECOND WITH SMALL BUSINESSES WHICH ARE SUBSTANTIAL LABOR SURPLUS AREA CONCERNS AND THIRD WITH CONCERNS WHICH ARE JUST SMALL BUSINESSES. THE NOTICE DEFINES A LABOR SURPLUS AREA CONCERN AS ONE WHICH WILL INCUR ON ACCOUNT OF MANUFACTURING OR PRODUCTION, BY ITSELF OR ITS FIRST-TIER SUBCONTRACTORS, COSTS OF MORE THAN 50 PERCENT OF THE CONTRACT PRICE IN LABOR SURPLUS AREAS. FURTHER, PARAGRAPH (C) OF THE NOTICE REQUIRES EACH BIDDER DESIRING TO BE CONSIDERED FOR AWARD AS A SMALL BUSINESS LABOR SURPLUS AREA CONCERN ON THE SET-ASIDE PORTION OF THE PROCUREMENT TO IDENTIFY IN ITS BID THE GEOGRAPHICAL AREAS IN WHICH IT PROPOSES TO PERFORM, OR WILL CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF THE PRODUCTION OF THE CONTRACT. FOLLOWING THE NOTICE, THERE APPEARS THE FOLLOWING STATEMENT:

EACH BIDDER DESIRING TO BE CONSIDERED FOR AWARD AS A SMALL BUSINESS LABOR SURPLUS AREA CONCERN ON THE SET-ASIDE PORTION OF THIS PROCUREMENT SHALL ENTER THE INFORMATION CALLED FOR BY PARAGRAPH (C) OF THE ABOVE NOTICE IN THE SPACES PROVIDED BELOW. THE INFORMATION IS TO BE SUPPLIED ONLY FOR LABOR SURPLUS AREAS IN WHICH THE BIDDER PROPOSES THAT A SUBSTANTIAL PROPORTION OF MANUFACTURING OR PRODUCTION WILL BE PERFORMED.

THEREAFTER FOLLOWS TWO SERIES OF BLANK SPACES: THE FIRST SERIES, LABELED "PRODUCTION BY DER," IS FOLLOWED BY SPACES CALLING FOR INFORMATION AS TO NAME OF PLANT, POINT OF PRODUCTION AND GEOGRAPHICAL AREA AND THE SECOND SERIES, LABELED "PRODUCTION BY FIRST-TIER SUBCONTRACTORS," IS FOLLOWED BY SPACES CALLING FOR INFORMATION AS TO THE NAME OF FIRST-TIER SUBCONTRACTOR, POINT OF PRODUCTION AND GEOGRAPHICAL AREA.

LEBANON CHEMICAL CORPORATION IN THE SPACES UNDER "PRODUCTION BY BIDDER" IN FORM 1773 INDICATES THAT IT WILL PERFORM THE CONTRACT IN LEBANON, PENNSYLVANIA, WHICH IS REPORTED NOT TO BE A LABOR SURPLUS AREA. THE SPACES UNDER "PRODUCTION BY FIRST-TIER SUBCONTRACTORS" ARE BLANK. CENTRAL CHEMICAL CORPORATION IN THE FIRST SERIES OF BLANK SPACES IN FORM 1773 FURNISHES INFORMATION THAT IT WILL PRODUCE IN HAGERSTOWN, MARYLAND, WHICH IS REPORTED TO BE A PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA. LIKEWISE LEFT BLANK THE SECOND SERIES OF SPACES.

AFTER BID OPENING, BOTH LEBANON AND CENTRAL FURNISHED A COST BREAKDOWN ON THE DDT. THIS ADDITIONAL INFORMATION INDICATES THAT A SUBSTANTIAL PART OF THE PRICE OF BOTH COMPANIES IS THE RESULT OF CONTEMPLATED PURCHASES OF RAW MATERIAL FROM SUPPLIERS. MOREOVER, THE LOCATION OF THE SUPPLIERS DESIGNATED AND THE COST OF THE MATERIALS TO BE PURCHASED FROM THEM INDICATE THAT A SUBSTANTIAL PORTION OF LEBANON'S PERFORMANCE WOULD BE ACCOMPLISHED IN LABOR SURPLUS AREAS, WHEREAS THE INFORMATION FURNISHED BY CENTRAL SHOWS THAT A SUBSTANTIAL PORTION OF THE MATERIALS WHICH IT WOULD USE WOULD BE OBTAINED FROM SOURCES IN LOCATIONS NOT CLASSIFIED AS LABOR SURPLUS AREAS. THUS, WHEREAS THE INFORMATION INCLUDED IN LEBANON'S BID INDICATES THAT IT WOULD PERFORM NOT AS A LABOR SURPLUS AREA CONCERN, THE ADDITIONAL INFORMATION FURNISHED BY IT INDICATES THAT IT WILL PERFORM IN A LABOR SURPLUS AREA AND WHEREAS THE INFORMATION INCLUDED IN CENTRAL'S BID INDICATES IT WILL PERFORM IN A LABOR SURPLUS AREA, THE ADDITIONAL INFORMATION IT FURNISHED INDICATES IT WILL NOT.

CORRESPONDENCE FROM LEBANON TO THE CONTRACTING OFFICER INDICATES THAT IT DID NOT CONSIDER THE INVITATION FOR BIDS TO REQUIRE IT TO CONSIDER ITS RAW MATERIAL SUPPLIERS IN ESTABLISHING ITSELF IN ITS BID AS A LABOR SURPLUS AREA CONCERN. ONLY AFTER DISCUSSING THE MATTER WITH THE SMALL BUSINESS ADMINISTRATION AFTER THE OPENING OF BIDS DID IT REALIZE THAT THE RAW MATERIAL SUPPLIERS SHOULD BE CONSIDERED. CORRESPONDENCE FROM CENTRAL TO THE CONTRACTING OFFICER LIKEWISE SHOWS THAT IT DID NOT UNDERSTAND THAT THE AREA WHERE THE RAW MATERIALS ARE TO BE PRODUCED WOULD HAVE SIGNIFICANCE IN DECIDING WHETHER THE COMPANY WILL BE PERFORMING IN A LABOR SURPLUS AREA.

THE LETTER OF NOVEMBER 2, 1964, FROM THE GENERAL COUNSEL, INDICATES THAT DOUBT EXISTS AS TO WHICH DECISIONS OF OUR OFFICE ARE PROPERLY FOR APPLICATION IN THE INSTANT CASE IN DETERMINING WHETHER LEBANON OR CENTRAL IS ENTITLED TO FIRST PRIORITY TO NEGOTIATE FOR THE SET-ASIDE PORTION OF THE INVITATION. IT IS INDICATED THAT THE DOUBT IS GENERATED BY THE FACT THAT IN CERTAIN DECISIONS OF OUR OFFICE CONSIDERATION OF INFORMATION ON PLACE OF PERFORMANCE OF LABOR SET ASIDES FURNISHED AFTER THE OPENING OF BIDS WAS PERMITTED, BUT THAT SUBSEQUENTLY FOLLOWING THE REVISION OF FORM 1773 IT WAS HELD THAT IT WOULD NOT BE PROPER TO CONSIDER INFORMATION FURNISHED AFTER BID OPENING. IT IS POINTED OUT, HOWEVER, THAT THEREAFTER OUR OFFICE HELD THAT A BIDDER COULD BE ALLOWED TO FURNISH INFORMATION AFTER BID OPENING WHERE THE INVITATION CALLED FOR INFORMATION AS TO FIRST- TIER SUBCONTRACTORS BUT WAS SILENT AS TO THE NEED FOR THE INFORMATION REGARDING SUPPLIERS AND THAT MORE RECENTLY OUR OFFICE HAS INDICATED THAT IT WOULD BE PROPER TO CONSIDER INFORMATION AFTER BID OPENING IF IT GOES TO SHOW THAT THE BIDDER WILL PERFORM IN THE CATEGORY INDICATED IN ITS BID, BUT NOT IF IT IS TO IMPROVE THE BIDDER'S POSITION IN THE ORDER OF PRIORITY.

NO PROBLEM IS INDICATED IN DOWNGRADING CENTRAL IN THE ORDER OF PRIORITY. SINCE CENTRAL HAS FURNISHED INFORMATION SHOWING THAT IT WILL NOT PERFORM SUBSTANTIALLY IN A LABOR SURPLUS AREA, NOTHING CAN BE GAINED BY TREATING IT AS IF IT WILL. CENTRAL COULD NOT BE MADE TO TAKE THE AWARD ON THE HIGH PRIORITY BASIS SINCE BIDDERS ARE FREE TO REFUSE AWARD OF A SET-ASIDE MERELY BY DECLINING TO NEGOTIATE AFTER BID OPENING.

WITH RESPECT TO THE BID OF LEBANON IT IS OUR OPINION THAT THE FACTS OF THE CASE ARE ANALOGOUS TO B-152359, DECEMBER 5, 1963, WHEREIN THE ACTION OF A BIDDER FURNISHING INFORMATION AS TO ITS SUPPLIERS AFTER BID OPENING WAS UPHELD WHERE THE INVITATION PROVIDED THAT BIDDERS SHOULD SPECIFY THE LOCATIONS OF "FIRST-TIER SUBCONTRACTORS.' IN THAT DECISION WE HELD THAT THE INVITATION COULD REASONABLY BE INTERPRETED AS NOT REQUIRING SUPPLIERS OF SUCH MATERIALS TO BE CONSIDERED AS ,SUBCONTRACTORS"--- THE EXACT SITUATION AS SEEMS TO APPLY TO BOTH LEBANON AND CENTRAL IN THE PRESENT CASE--- AND IN THE CIRCUMSTANCES WE PERMITTED THE RECEIPT AND CONSIDERATION OF INFORMATION RELATIVE TO SUPPLIERS AFTER THE OPENING OF BIDS, WHICH, AFTER ALL, WAS IMPORTANT TO A DETERMINATION AS TO WHETHER THE CONTRACT WOULD BE PERFORMED IN A LABOR SURPLUS AREA. SEE ALSO B-154390, JUNE 26, 1964, WHEREIN THERE WAS UPHELD THE QUALIFICATION OF ONE BIDDER ON THE BASIS OF THE SOURCE OF ITS RAW MATERIALS WHEN PRIOR TO BID OPENING THE CONTRACTING OFFICER MISINFORMED ANOTHER BIDDER THAT QUALIFICATION AS A LABOR SURPLUS AREA CONCERN WOULD BE BASED UPON THE LOCATION OF THE BIDDER REGARDLESS OF WHERE THE SOURCE OF THE RAW MATERIAL WAS LOCATED.

THE DECISION IN B-149697, NOVEMBER 5, 1962, WHICH WOULD NOT PERMIT A BIDDER TO FURNISH AFTER BID OPENING INFORMATION SHOWING A DIFFERENT SITE FOR PERFORMANCE IN THE SAME PRIORITY GROUP AS INDICATED IN THE BID, WAS NOT FOLLOWED IN B-153267, JUNE 8, 1964. IN B-150676, FEBRUARY 7, 1963, B- 151051, MAY 2, 1963, AND B-151247, JUNE 28, 1963, WHEREIN BIDDERS WERE NOT PERMITTED TO FURNISH AFTER BID OPENING INFORMATION AS TO THEIR STATUS, THERE WERE ADMONITIONS IN THE INVITATIONS FOR BIDS WARNING BIDDERS ABOUT THE FAILURE TO FURNISH ALL NECESSARY INFORMATION WITH THEIR BIDS. THEREFORE, THERE IS, AT LEAST, ONE FACTUAL DISTINCTION IN THOSE CASES WHICH IS NOT PRESENT IN THE IMMEDIATE CASE.

OUR RECENT DECISIONS IN B-153267, JUNE 8, 1964, WHICH PERMITTED ABIDDER TO CHANGE LOCATIONS OF PERFORMANCE WHICH WERE IN THE SAME LABOR SURPLUS PRIORITY GROUP AS INDICATED IN ITS BID, AND IN B-154576, JULY 29, 1964, 44 COMP. GEN. 34, WHICH WOULD NOT PERMIT A BIDDER TO IMPROVE ITS STANDING IN THE ORDER OF PRIORITY, WERE NOT INVOLVED WITH THE PROBLEM OF INTERPRETATION OF THE LANGUAGE "FIRST-TIER SUBCONTRACTORS" AND THEREFORE ARE NOT RELEVANT TO THE IMMEDIATE SITUATION. MOREOVER, OUR TREATMENT IN THE CASE INVOLVING THE INTERPRETATION OF "FIRST-TIER SUBCONTRACTORS" IS IN LINE WITH OUR EARLIER DECISIONS 41 COMP. GEN. 160, B-146244, SEPTEMBER 6, 1961, AND B-145942, B-146040, SEPTEMBER 6, 1961, WHICH PERMITTED CONSIDERATION OF INFORMATION ON THE PLACE OF PERFORMANCE SUBMITTED AFTER BID OPENING WHERE THE INVITATIONS WERE NOT EXPLICIT ENOUGH TO REQUIRE THAT THERE BE FURNISHED WITH THE BIDS INFORMATION FROM WHICH IT COULD BE DETERMINED ABSOLUTELY THAT THE BIDDER WOULD QUALIFY AS A LABOR SURPLUS CONCERN AND DID NOT STATE THE EFFECT OF FAILURE TO FURNISH THE NECESSARY INFORMATION.

IN THE CIRCUMSTANCES, INASMUCH AS IT HAS BEEN DETERMINED FROM THE INFORMATION FURNISHED BY LEBANON AFTER THE OPENING OF BIDS THAT THE CONTRACT WILL BE PERFORMED SUBSTANTIALLY IN LABOR SURPLUS AREAS AND SINCE THE INFORMATION FURNISHED BY CENTRAL INDICATES THAT A CONTRACT AWARDED TO IT WOULD NOT BE SO PERFORMED, WE BELIEVE IT WOULD BE PROPER TO PROVIDE LEBANON WITH FIRST PRIORITY FOR NEGOTIATION OF THE SET ASIDE.

AS A RESULT OF THE FOREGOING CONCLUSION, NO COMMENT ON THE TOKEN BID ASPECT OF THE CENTRAL BID IS REQUIRED AND THAT PHASE OF THE CASE HAS NOT BEEN CONSIDERED.