B-157110, SEP. 7, 1965

B-157110, SEP. 7, 1965

TO CAR ROAD AND CAR ROAD:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 23, 1965, PROTESTING ON BEHALF OF GIBSON AND CUSHMAN, INC., AGAINST THE AWARD OF A CONTRACT TO GATES CONSTRUCTION CORPORATION FOR DREDGING AND OTHER WORK ON THE BEACH EROSION AND HURRICANE PROJECT AT RARITAN BAY AND SANDY HOOK BAY, MADISON TOWNSHIP, NEW JERSEY, UNDER IFB NO. CIVENG-30-075-65-4.

THE INVITATION WAS ISSUED BY THE NEW YORK ARMY ENGINEER DISTRICT ON FEBRUARY 18, 1965, AND WAS SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS BY PARAGRAPH 13, PAGE IB-4, WHICH CONTAINED THE "NOTICE OF TOTAL SMALL BUSINESS SET-ASIDE" CLAUSE PRESCRIBED BY PARAGRAPH 1-706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION. UNDER PARAGRAPH 15 "PERFORMANCE OF WORK BY CONTRACTOR," PAGE IB-4, AND PARAGRAPH 39 OF THE GENERAL PROVISIONS, THE CONTRACTOR WAS REQUIRED TO PERFORM ON THE SITE, AND WITH HIS OWN ORGANIZATION, WORK EQUIVALENT TO AT LEAST 20 PERCENT OF THE TOTAL AMOUNT OF THE WORK TO BE PERFORMED UNDER THE CONTRACT. AFTER AWARD THE SUCCESSFUL BIDDER WAS PERMITTED 10 DAYS WITHIN WHICH TO FURNISH A DESCRIPTION OF THE WORK THAT HE INTENDED TO PERFORM WITH HIS OWN ORGANIZATION. THE POLICY OF THE GOVERNMENT, AS DECLARED BY THE CONGRESS, THAT A FAIR PROPORTION OF THE PURCHASES AND CONTRACTS FOR SUPPLIES AND SERVICES (THAT ARE WITHIN THEIR CAPABILITIES) BE PLACED WITH SMALL BUSINESS CONCERNS (ASPR 1-702) WAS STATED IN PARAGRAPH 23 OF THE GENERAL PROVISIONS WHEREIN THE CONTRACTOR ALSO AGREES "TO ACCOMPLISH THE MAXIMUM AMOUNT OF SUBCONTRACTING TO SMALL BUSINESS CONCERNS THAT THE CONTRACTOR FINDS TO BE CONSISTENT WITH THE EFFICIENT PERFORMANCE OF THIS CONTRACT.' TO FURTHER EFFECTUATE SUCH POLICY, A SMALL BUSINESS SUBCONTRACTING PROGRAM(ASPR 1-707.3 (B) ( WAS PRESCRIBED BY PARAGRAPH 41 OF THE GENERAL PROVISIONS IN WHICH THE CONTRACTOR AGREED TO ESTABLISH AND CONDUCT A SMALL BUSINESS SUBCONTRACTING PROGRAM WHICH WOULD ENABLE SMALL BUSINESS CONCERNS TO BE CONSIDERED FAIRLY AS SUBCONTRACTORS AND SUPPLIERS UNDER THE CONTRACT. IN THAT CONNECTION SUBPARAGRAPH (A) (3) PROVIDED THAT THE CONTRACTOR SHALL ASSURE THAT SMALL BUSINESS CONCERNS WILL HAVE AN EQUITABLE OPPORTUNITY TO COMPETE FOR SUBCONTRACTS, PARTICULARLY BY ARRANGING SOLICITATIONS, TIME FOR THE PREPARATION OF BIDS, QUANTITIES, SPECIFICATIONS, AND DELIVERY SCHEDULES SO AS TO FACILITATE THE PARTICIPATION OF SMALL BUSINESS CONCERNS.

THE THREE BIDS RECEIVED IN RESPONSE TO THE INVITATION WERE OPENED ON MARCH 30, 1965, AND WERE AS FOLLOWS:

TABLE

GATES CONSTRUCTION CORP. $661,760.69

GIBSON AND CUSHMAN, INC. 722,640.50

EAST COAST DREDGING, INC. 784,049.00

IN SUBMITTING ITS BID, GATES EXECUTED THE FORM ENTITLED "PERFORMANCE OF WORK BY CONTRACTOR" AND SET FORTH THEREIN THAT IT WOULD PERFORM THE FOLLOWING ITEMS OF WORK WITH ITS OWN ORGANIZATION:

TABLE

ITEM NO. ESTIMATED COST

PERCENT OF TOTAL WORK

1 $ 30,475 4.6

3 421,600 63.7

39 3,172 .05

THE DESCRIPTION OF SUCH ITEMS OF WORK SHOWN ON THE UNIT PRICE SCHEDULE (ENG FORM NO. 1618-R) IS (NO. 1) "MOBILIZATION AND DEMOBILIZATION OF DREDGING PLANT AND EQUIPMENT" FOR THE JOB; (NO. 3) ,SAND FILL (HYDRAULICALLY PLACED)" IN THE ESTIMATED QUANTITY OF 620,000 CUBIC YARDS; (NO. 39) 26 ,RESTRAINER BENTS.' THE DREDGING PLANT TO BE USED WAS IDENTIFIED BY GATES AS THE HYDRAULIC DREDGE "MARYLAND" THEN LOCATED AT CHATHAM, MASSACHUSETTS, AND THE RECORD SHOWS THAT GATES HAD ARRANGED WITH THE OWNER, AMERICAN DREDGING COMPANY (NOT A SMALL BUSINESS CONCERN), FOR RENTING THE DREDGE ON A MONTHLY BASIS, TOGETHER WITH THE NECESSARY ATTENDANT PLANT, PIPELINES AND A FULL OPERATING CREW, IN THE EVENT GATES WAS AWARDED THE CONTRACT.

AFTER THE OPENING OF BIDS AND PRIOR TO AWARD, YOU PROTESTED TO THE DISTRICT ENGINEER ON BEHALF OF GIBSON AND CUSHMAN TO THE EFFECT THAT GATES WAS NOT QUALIFIED TO PERFORM THE WORK AND WAS IN FACT ACTING AS AGENT OF A LARGE BUSINESS CONCERN (AMERICAN DREDGING COMPANY) AND THEREFORE WAS NOT ELIGIBLE TO RECEIVE THE AWARD AS A SMALL BUSINESS CONCERN. BY LETTER DATED APRIL 15, 1965, THE AREA SMALL BUSINESS ADMINISTRATION OFFICE ADVISED THE DISTRICT ENGINEER AS FOLLOWS:

"IN RESPONSE TO YOUR TELEPHONE INQUIRY OF THIS DATE BE ADVISED THAT THIS OFFICE SEES NO OBJECTION TO A SMALL BUSINESS FIRM WHICH IS BIDDING ON A PROCUREMENT SET-ASIDE FOR SMALL BUSINESS FROM SUBCONTRACTING A PORTION OF THE PROJECT NAMELY, DREDGING, TO A LARGE BUSINESS CONCERN.

"AS LONG AS THE SMALL BUSINESS FIRM PERFORMS THE PORTION OF THE JOB, AS REQUIRED BY THE INVITATION FOR BID, THIS WOULD NOT APPEAR TO VIOLATE EITHER THE SMALL BUSINESS ACT OR SBA RULES AND REGULATIONS.'

IN VIEW OF SUCH ADVICE AND INASMUCH AS A PRE-AWARD SURVEY HAD ESTABLISHED TO THE SATISFACTION OF THE CONTRACTING OFFICER THAT GATES WAS RESPONSIBLE AND CAPABLE OF SATISFACTORY PERFORMANCE, THE CONTRACT WAS AWARDED TO GATES ON APRIL 21, 1965, AS THE LOW RESPONSIVE AND RESPONSIBLE BIDDER.

ON THE SAME DAY THAT THE CONTRACT WAS AWARDED, GIBSON AND CUSHMAN INSTITUTED AN ACTION IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, CIVIL ACTION FILE NO. 1211, AGAINST COL. M. M. MILETICH, THE DISTRICT ENGINEER, ALLEGING THAT IT HAD ACTUALLY SUBMITTED THE LOW RESPONSIVE BID UNDER THE INVITATION, AND THAT THE DISTRICT ENGINEER DID NOT HAVE LEGAL AUTHORITY TO AWARD THE CONTRACT TO GATES. THE RELIEF SOUGHT BY THE PLAINTIFF, AS STATED IN THE COMPLAINT, IS A DECLARATION NULLIFYING THE BID OF GATES AND A TEMPORARY AND PERMANENT INJUNCTION AGAINST THE DEFENDANT, ENJOINING HIM FROM AWARDING THE CONTRACT TO GATES ON THE PRINCIPAL GROUNDS THAT GATES WAS ACTING AS AGENT FOR AMERICAN DREDGING COMPANY, A DISQUALIFIED BIDDER, AND THAT SUCH AN AWARD WOULD NOT EFFECT ANY SIGNIFICANT PARTICIPATION IN THE WORK BY SMALL BUSINESS CONCERNS AS INTENDED BY THE ABOVE PERTINENT PROVISIONS OF THE INVITATION. ON APRIL 22, 1965, THE UNITED STATES DISTRICT JUDGE SIGNED AN ORDER DIRECTING THE DEFENDANT TO SHOW CAUSE WHY A PRELIMINARY INJUNCTION SHOULD NOT ISSUE ENJOINING THE DEFENDANT FROM MAKING AWARD TO GATES PENDING THE FINAL HEARING AND DETERMINATION OF THE ACTION. A HEARING WAS HELD ON MAY 11 (OR 12), 1965, ON PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION WHICH MOTION WAS DENIED AND AN ORDER TO THAT EFFECT WAS SIGNED ON MAY 19, 1965. DEFENDANT'S MOTION TO DISMISS FOR LACK OF JURISDICTION IN THE COURT WAS RESERVED FOR LATER CONSIDERATION. WORK ON THE PROJECT CONTINUED THEREAFTER AND WE WERE ADVISED INFORMALLY BY THE CORPS OF ENGINEERS ON AUGUST 20, 1965, THAT THE CONTRACT WAS AT THAT TIME APPROXIMATELY 74 PERCENT COMPLETE. WE HAVE ALSO BEEN INFORMED BY THE DEPARTMENT OF JUSTICE, CIVIL DIVISION, THAT THE CIVIL ACTION OF GIBSON AND CUSHMAN IS STILL AWAITING ACTION ON THE COURT'S TRIAL CALENDAR.

IN YOUR LETTER OF JUNE 23, YOU STATE THAT THE GROUNDS FOR THE PROTEST BY GIBSON AND CUSHMAN ARE AS FOLLOWS:

"A. THAT THE AWARD DOES NOT COMPLY WITH PARAGRAPH 13 OF THE ABOVE INVITATION FOR BIDS WHICH RESTRICTS THE AWARD OF THE CONTRACT TO A "SMALL BUSINESS" BECAUSE SUBSTANTIALLY ALL OF THE WORK TO BE PERFORMED IS BEING PERFORMED WITH THE DREDGE, PLANT, EQUIPMENT, CREW AND ORGANIZATION OF THE AMERICAN DREDGING CORPORATION, A FIRM WHICH DOES NOT QUALIFY AS A "SMALL BUSINESS.'

"B. THAT THE AWARD DOES NOT COMPLY WITH PARAGRAPH 15 OF THE ABOVE INVITATION FOR BIDS (WHICH REQUIRES THE SUCCESSFUL CONTRACTOR TO PERFORM AT LEAST 20 PERCENT OF THE CONTRACT WITH ITS OWN ORGANIZATION) BECAUSE GATES CONSTRUCTION CORPORATION IS PERFORMING, AT THE MOST, ONE HALF OF ONE PERCENT OF THE CONTRACT WITH ITS OWN ORGANIZATION.

"C. THAT THE AWARD DOES NOT COMPLY WITH PARAGRAPH 23 OF THE CONSTRUCTION CONTRACT ANNEXED TO THE ABOVE INVITATION FOR BIDS WHICH REQUIRES THE SUCCESSFUL CONTRACTOR TO ACCOMPLISH THE MAXIMUM AMOUNT OF SUBCONTRACTING TO SMALL BUSINESS CONCERNS IN THAT GATES CONSTRUCTION CORPORATION SUBCONTRACTED OUT SUBSTANTIALLY ALL OF THE WORK TO THE AMERICAN DREDGING CORPORATION, A BIG BUSINESS, WITHOUT MAKING ANY ATTEMPT TO SUBCONTRACT OUT THE WORK TO A SMALL BUSINESS.'

OUR POLICY IS THAT WE WILL NOT UNDERTAKE TO ACT ON OR DECIDE A MATTER WHICH IS THE SUBJECT OF LITIGATION BETWEEN THE SAME PARTIES IN A COURT OF COMPETENT JURISDICTION. INASMUCH AS THE BASIS OF YOUR PROTEST TO THIS OFFICE IS ESSENTIALLY THE SAME AS THAT PRESENTED BY THE PLAINTIFF IN CIVIL ACTION NO. 1211, WE FEEL THAT IT WOULD BE IMPROPER FOR OUR OFFICE TO GIVE FURTHER CONSIDERATION TO THIS MATTER UNTIL SOME DISPOSITION HAS BEEN MADE OF THAT ACTION BY THE COURT. IF THERE SHOULD THEN REMAIN ANY ISSUES PROPERLY FOR CONSIDERATION HERE WE SHALL BE GLAD TO REOPEN THE MATTER IF YOU SO REQUEST.