B-166999, AUGUST 25, 1969, 49 COMP. GEN. 120

B-166999: Aug 25, 1969

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THE REQUIREMENT FOR LISTING SUBCONTRACTORS IS INTENDED TO DISCOURAGE BID SHOPPING AND ENCOURAGE A COMPETITIVE MARKET AMONG CONSTRUCTION SUBCONTRACTORS. DOES NOT APPLY TO FIRMS ASSEMBLING OFF THE-SHELF ITEMS BUT TO MANUFACTURERS AND FABRICATORS WHO ARE REQUIRED TO MEET PARTICULAR INVITATION SPECIFICATIONS. THE CONSTRUCTION PROJECT IS SUBJECT TO THE INVITATION PROVISION THAT THE CONTRACTING OFFICER APPROVE THE ELECTRICAL EQUIPMENT TO BE INSTALLED AND NOT TO THE PROVISION FOR LISTING SUBCONTRACTORS. 1969: REFERENCE IS MADE TO YOUR LETTER OF MAY 14. WE HAVE BEEN ADVISED THAT THE DEPARTMENT OF HEALTH. THE SIX BIDS RECEIVED WERE OPENED. THE LOW BASE BID WAS FROM FISCHBACH AND MOORE IN THE AMOUNT OF $887.

B-166999, AUGUST 25, 1969, 49 COMP. GEN. 120

CONTRACTS -- SUBCONTRACTS -- BID SHOPPING -- BIDDER LISTED AS SUB CONTRACTOR THE LOW BIDDER AWARDED A CONTRACT FOR THE MODERNIZATION OF A GOVERNMENT HOSPITAL UNDER AN INVITATION SPECIFYING THE LISTING OF SUBCONTRACTORS FOR THE ELECTRICAL WORK CATEGORY OF THE PROJECT ONLY, WHO ALTHOUGH NOT A MANUFACTURER LISTED ITSELF IN THE BID AS THE SUBCONTRACTOR FOR THE ELECTRICAL WORK CONSISTING OF SUCH OFF-THE-SHELF ITEMS AS SUBSTATIONS, SWITCH GEAR, AND TRANSFORMERS, HAD SUBMITTED A RESPONSIVE BID. THE REQUIREMENT FOR LISTING SUBCONTRACTORS IS INTENDED TO DISCOURAGE BID SHOPPING AND ENCOURAGE A COMPETITIVE MARKET AMONG CONSTRUCTION SUBCONTRACTORS, AND DOES NOT APPLY TO FIRMS ASSEMBLING OFF THE-SHELF ITEMS BUT TO MANUFACTURERS AND FABRICATORS WHO ARE REQUIRED TO MEET PARTICULAR INVITATION SPECIFICATIONS. THEREFORE, THE CONSTRUCTION PROJECT IS SUBJECT TO THE INVITATION PROVISION THAT THE CONTRACTING OFFICER APPROVE THE ELECTRICAL EQUIPMENT TO BE INSTALLED AND NOT TO THE PROVISION FOR LISTING SUBCONTRACTORS.

TO THE EXPERT ELECTRIC, INC., AUGUST 25, 1969:

REFERENCE IS MADE TO YOUR LETTER OF MAY 14, 1969, PROTESTING AGAINST AN AWARD TO FISCHBACH AND MOORE, INC., UNDER AN INVITATION FOR BIDS (IFB) DATED APRIL 7, 1969, ISSUED BY THE U.S. PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, FOR PROJECT NO. 176, ELECTRICAL MODERNIZATION OF THE U.S. PUBLIC HEALTH SERVICE HOSPITAL, BAY STREET AND VANDERBILT AVENUE, STATEN ISLAND, NEW YORK. WE HAVE BEEN ADVISED THAT THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, ON THE BASIS OF URGENCY, MADE THE AWARD TO FISCHBACH AND MOORE ON JULY 10, 1969.

ON MAY 14, 1969, THE SIX BIDS RECEIVED WERE OPENED. THE LOW BASE BID WAS FROM FISCHBACH AND MOORE IN THE AMOUNT OF $887,594. THE NEXT LOW BID WAS FROM EXPERT ELECTRIC, INC., IN THE AMOUNT OF $903,000.

YOUR FIRM PROTESTS ANY AWARD TO FISCHBACH AND MOORE ON THE GROUND THAT THEIR BID WAS NONRESPONSIVE FOR FAILURE TO LIST THE PROPOSED SUBCONTRACTORS FOR "ELECTRICAL" WORK AS REQUIRED BY PARAGRAPH 1B-07 OF THE SPECIFICATIONS. YOU STATE THAT WHILE THE APPARENT LOW BIDDER IDENTIFIED ITSELF AS THE SUBCONTRACTOR FOR ELECTRICAL WORK, IT IS NOT A MANUFACTURER OR FABRICATOR OF THE ELECTRICAL EQUIPMENT REQUIRED TO BE MANUFACTURED IN ACCORDANCE WITH THE SPECIFICATIONS. YOUR INTERPRETATION OF THE CITED PROVISION IS THAT IT REQUIRES ALL BIDDERS TO LIST THE NAMES OF THE FIRMS OR SUBCONTRACTORS FROM WHOM THEY WILL OBTAIN THE SUBSTATIONS, SWITCH GEAR AND TRANSFORMERS. YOU STATE FOR INFORMATIONAL PURPOSES THAT THE ELECTRICAL EQUIPMENT INVOLVED IS VALUED AT APPROXIMATELY $300,000, THUS FORMING ALMOST 50 PERCENT OF THE TOTAL VALUE OF THE CONTRACT PLANS AND SPECIFICATIONS.

PARAGRAPH IB-07 OF THE SPECIAL CONDITIONS ENTITLED "LISTING OF SUBCONTRACTORS" READS, IN PART, AS FOLLOWS:

A. FOR EACH CATEGORY ON THE LIST OF SUBCONTRACTORS WHICH IS INCLUDED AS PART OF THE BID FORM, THE BIDDER SHALL SUBMIT THE NAME AND ADDRESS OF THE INDIVIDUAL OR FIRM WITH WHOM HE PROPOSES TO SUBCONTRACT FOR PERFORMANCE OF SUCH CATEGORY, PROVIDED, THAT THE BIDDER MAY ENTER HIS OWN NAME FOR ANY CATEGORY WHICH HE WILL PERFORM WITH PERSONNEL CARRIED ON HIS OWN PAYROLL (OTHER THAN OPERATORS OF LEASED EQUIPMENT) TO INDICATE THAT THE CATEGORY WILL NOT BE PERFORMED BY SUBCONTRACT.

B. IF THE BIDDER INTENDS TO SUBCONTRACT WITH MORE THAN ONE SUBCONTRACTOR FOR A CATEGORY OR TO PERFORM A PORTION OF A CATEGORY WITH HIS OWN PERSONNEL AND SUBCONTRACT WITH ONE OR MORE SUBCONTRACTORS FOR THE BALANCE OF THE CATEGORY, THE BIDDER SHALL LIST ALL SUCH INDIVIDUALS OR FIRMS (INCLUDING HIMSELF) AND STATE THE SERVICE TO BE FURNISHED BY EACH.

D. THE LIST MAY BE SUBMITTED WITH THE BID OR SEPARATELY BY TELEGRAPH, MAIL, OR OTHERWISE. IF MAILED SEPARATELY, THE ENVELOPE MUST BE SEALED, IDENTIFIED AS TO CONTENT, AND ADDRESSED IN THE SAME MANNER AS PRESCRIBED FOR SUBMISSION OF BIDS. FAILURE TO SUBMIT THE LIST BY THE TIME SET FOR BID OPENING SHALL CAUSE THE BID TO BE CONSIDERED NON RESPONSIVE EXCEPT UNDER THE CONDITIONS SET OUT IN INSTRUCTION NO. 7 OF THE INSTRUCTION TO BIDDERS (STANDARD FORM 22).

E. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE SUCCESSFUL BIDDER AGREES THAT HE WILL NOT HAVE ANY OF THE LISTED CATEGORIES INVOLVED IN THE PERFORMANCE OF THIS CONTRACT PERFORMED BY ANY INDIVIDUAL OR FIRM OTHER THAN THOSE NAMED FOR THE PERFORMANCE OF SUCH CATEGORIES.

F. THE TERM "SUBCONTRACTOR" FOR THE PURPOSE OF THIS REQUIREMENT SHALL MEAN THE INDIVIDUAL OR FIRM WITH WHOM THE BIDDER PROPOSES TO ENTER INTO A SUBCONTRACT FOR MANUFACTURE, FABRICATING, INSTALLING OR OTHERWISE PERFORMING WORK UNDER THIS CONTRACT PURSUANT TO SPECIFICATIONS APPLICABLE TO ANY CATEGORY INCLUDED ON THE LIST.

THE ADMINISTRATIVE OFFICE REPORTS THAT SINCE THE PROJECT IS PRIMARILY ONE TO BE PERFORMED BY THE ELECTRICAL TRADE, ONLY "ELECTRICAL" WAS INCLUDED IN THE "LIST OF SUBCONTRACTORS" ISSUED WITH THE IFB. THE IFB DID NOT REQUIRE THE LISTING OF SUBCONTRACTORS FOR EXCAVATION, FOUNDATIONS, CONCRETE, PAINTING, SHEET METAL WORK, ETC. IT FURTHER REPORTS THAT THE PROVISIONS REGARDING SUBCONTRACTORS IN THE SPECIFICATIONS ARE IDENTICAL TO THOSE USED BY THE GENERAL SERVICES ADMINISTRATION (GSA) AND MANY OTHER CIVILIAN GOVERNMENT AGENCIES AND THAT TO ITS KNOWLEDGE MANUFACTURERS OR SUPPLIERS WHO DO NOT PERFORM WORK AT THE PROJECT SITE HAVE NEVER BEEN REQUIRED TO BE LISTED AS SUBCONTRACTORS. IT IS ALSO POINTED OUT THAT NO OTHER BIDDERS ON THE SUBJECT INVITATION EXCEPT EXPERT ELECTRIC LISTED MANUFACTURERS OR SUPPLIERS AS SUBCONTRACTORS IN THEIR BIDS, AND IT IS STATED THAT THE CONTRACTING AGENCY DOES NOT CONSIDER THEM TO BE SUBCONTRACTORS UNDER THE REQUIREMENTS OF THE CONTRACTS. IN THIS CONNECTION IT IS INTERESTING TO NOTE THAT THIS PROJECT WAS PREVIOUSLY SOLICITED UNDER DATE OF DECEMBER 10, 1968, WITH BID OPENING SET FOR JANUARY 14, 1969; THAT AT THAT TIME EXPERT ELECTRIC WAS THE ONLY BIDDER AND THAT THE LIST OF SUBCONTRACTORS SUBMITTED WITH ITS BID AT THAT TIME DID NOT LIST ANY SUPPLIERS OF MATERIAL AS SUBCONTRACTORS.

THE CHIEF, DESIGN AND CONSTRUCTION BRANCH, OFFICE OF BUILDINGS AND FACILITIES, HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, REPORTS AS FOLLOWS: THE MAJOR ELECTRICAL COMPONENTS REQUIRED TO BE INSTALLED UNDER THE SUBJECT PROJECT ARE NOT MANUFACTURED OR FABRICATED, IN THE STRICT SENSE OF THESE WORDS, ESPECIALLY FOR THIS CONTRACT. IN ORDER TO MEET THE VARYING CHARACTERISTICS REQUIRED FOR EACH INDIVIDUAL JOB, UPON THE REQUEST OF A PURCHASER THE MANUFACTURERS OR SUPPLIERS ASSEMBLE A VARIETY OF CATALOG ITEMS IN A MANNER WHICH SATISFIES THE SPECIFICATIONS OF THE CONTRACT. AN EXAMPLE, IN THE CASE OF SWITCHGEAR, THE BASIC STRUCTURE IS A CATALOG ITEM TO WHICH ARE ADDED OTHER STANDARD CATALOG ITEMS OR FEATURES TO PROVIDE THE VOLTAGE, AMPERAGE AND SAFETY CHARACTERISTICS SPECIFIED. THE SWITCHGEAR WOULD BE ASSEMBLED BY FIRST PLACING TOGETHER A NUMBER OF STANDARD PANELS OR CUBICLES ADJACENT TO EACH OTHER. INSULATING BLOCKS TO HOLD BUS BARS ARE THEN INSTALLED IN STANDARD PRE-DRILLED HOLES. ON THE INSULATORS COPPER BUS BARS ARE THEN INSTALLED, USUALLY ONE FOR EACH 1,000 AMPERE RATING SPECIFIED. OTHER STANDARD HARDWARE ITEMS ARE INSERTED OR AFFIXED TO PRODUCE CELLS INTO WHICH ANY CIRCUIT BREAKER CAN BE MOUNTED. IN FACT THE SWITCHGEAR PANELS ARE SHIPPED SEPARATELY FROM THE CIRCUIT BREAKERS SINCE ALL CIRCUIT BREAKERS ARE STANDARDIZED AND INTERCHANGEABLE. EVEN ACCESSORY ITEMS FOR THE BREAKERS ARE REPRESENTED BY STANDARD ASA DEVICE NUMBERS IN USE BY ALL MANUFACTURERS. STRICTLY SPEAKING, ANY AGREEMENT BETWEEN A PRIME AND A SUBCONTRACTOR FOR AN ITEM IS A CONTRACT AND IN THAT SENSE WOULD BE CONSIDERED A SUBCONTRACT UNDER THE PRIME CONTRACT, HOWEVER THE TYPE OF SUBCONTRACT UNDER DISCUSSION IS NOT WITHIN THE INTENT OF THE "LISTING OF SUBCONTRACTORS" CLAUSE. TO MY KNOWLEDGE, SUBCONTRACTS FOR AN ASSEMBLY OF CATALOG ITEMS ARE GENERALLY INTERPRETED BY GOVERNMENT AGENCIES NOT TO FALL WITHIN THE MEANING OF THIS CLAUSE. THIS INTERPRETATION WERE NOT PLACED ON THIS CLAUSE THE RESULT WOULD BE THE LISTING OF MANUFACTURERS OR SUPPLIERS OF SUCH ITEMS AS PAINT. A PAINT MANUFACTURER, FOR INSTANCE, SUPPLIES PAINT TO MEET THE SPECIFICATIONS OF THE CONTRACT. THE MANUFACTURER OR SUPPLIER DOES NOT MANUFACTURE THE PAINT ESPECIALLY FOR THE PROJECT BUT ADDS PIGMENT, GLOSS, DRYING COMPONENTS, ETC., AS NECESSARY TO MEET THE CONTRACT SPECIFICATIONS.

PARAGRAPH 1B-07 CONFORMS TO THE PROCEDURES PRESCRIBED BY GSA (41 CFR 5B- 2,202-70(E)) FOR USE BY THE PUBLIC BUILDINGS SERVICE IN CARRYING ON THE CONSTRUCTION ACTIVITIES OF THAT AGENCY. THE PURPOSE OF THE LISTING OF SUBCONTRACTORS WAS TO ABOLISH OR LIMIT THE PRACTICE OF "BID SHOPPING," WHICH HAD BEEN FOUND BY GSA IN MANY INSTANCES TO RESULT IN PERFORMANCE FOR WORK BY SUBCONTRACTORS WHOSE COMPETENCE AND RESPONSIBILITY ARE QUESTIONABLE. A FURTHER REASON FOR THE LISTING REQUIREMENT AND THE SUBSTANTIAL ELIMINATION OF BID SHOPPING WAS TO ENCOURAGE THE DEVELOPMENT OF A TRUE COMPETITIVE MARKET AMONG CONSTRUCTION SUBCONTRACTORS, WITH RESULTANT SAVINGS ACCRUING TO THE BENEFIT OF THE GOVERNMENT.

AS ORIGINALLY PROMULGATED ON FEBRUARY 26, 1966, 31 F.R. 3183, THE SUBCONTRACTOR LISTING PROVISIONS OF THE GSA REGULATIONS INCLUDED THE FOLLOWING LANGUAGE FOR USE IN THE SPECIAL CONDITIONS OF CONSTRUCTION IFB'S:

(B) THE TERM "SUBCONTRACTOR" FOR THE PURPOSE OF THIS REQUIREMENT SHALL MEAN THE INDIVIDUAL OR FIRM WITH WHOM THE BIDDER PROPOSES TO ENTER INTO A SUBCONTRACT FOR A LISTED CATEGORY OF WORK OR MATERIAL. IF SUBCONTRACTS ARE TO BE MADE WITH MORE THAN ONE SUBCONTRACTOR FOR A CATEGORY OF WORK OR MATERIAL, EACH PROPOSED SUBCONTRACTOR SHALL BE LISTED WITH A STATEMENT OF THE SERVICE TO BE FURNISHED BY EACH.

HOWEVER, CERTAIN QUESTIONS SOON AROSE AS TO THE INTERPRETATION OF SUCH PROVISION. FOR EXAMPLE, IN ONE INSTANCE A DIFFERENCE OF OPINION DEVELOPED AS TO WHETHER THE FABRICATOR OF ARCHITECTURAL CAST STONE IN ACCORDANCE WITH DETAILED SPECIFICATIONS SHOULD BE CONSIDERED A MERE SUPPLIER NOT SUBJECT TO LISTING OR A SUBCONTRACTOR WHOSE LISTING WAS REQUIRED. IN OUR DECISION REPORTED AT 46 COMP. GEN. 156 (1966), WE HELD THAT SUCH A FABRICATOR WAS REQUIRED TO BE LISTED. SEE ALSO 46 COMP. GEN. 194 (1966). BECAUSE OF THIS AND SIMILAR DIFFICULTIES, THE REGULATION 41 CFR 5B-2.202- 70 WAS AMENDED ON NOVEMBER 24, 1966 (31 F.R. 14876), TO PROVIDE, AS QUOTED ABOVE FROM THE IFB, THAT THE TERM "SUBCONTRACTOR" SHOULD MEAN THE INDIVIDUAL OR FIRM WITH WHOM THE BIDDER PROPOSES TO ENTER INTO SUBCONTRACT FOR MANUFACTURE, FABRICATING, INSTALLING OR OTHERWISE PERFORMING WORK UNDER THIS CONTRACT PURSUANT TO SPECIFICATIONS APPLICABLE TO ANY CATEGORY INCLUDED ON THE LIST. WE ARE OF THE VIEW THAT SUCH LANGUAGE WAS INTENDED TO ENCOMPASS ONLY THOSE MANUFACTURERS AND FABRICATORS WHOSE PRODUCTS ARE SPECIALLY MADE TO CONFORM WITH PARTICULAR IFB SPECIFICATIONS, AND NOT TO FIRMS SUCH AS THOSE UNDER CONSIDERATION HERE WHO MERELY ASSEMBLE OFF-THE- SHELF ITEMS. IN THIS CONNECTION IT APPEARS TO BE PERTINENT TO NOTE THE PROVISIONS OF ARTICLE 9 OF THE GENERAL CONDITIONS OF THE CONTRACT (STANDARD FORM 23A) AND SECTION 12-03 OF THE SPECIAL CONDITIONS, BOTH OF WHICH REQUIRE SUBMISSION BY THE CONTRACTOR (NOT BY BIDDERS) OF DETAILS OF MACHINERY AND MECHANICAL AND OTHER EQUIPMENT PROPOSED TO BE INCORPORATED INTO THE WORK, SUBJECT TO APPROVAL BY THE CONTRACTING OFFICER. IN THE LIGHT OF THE STATEMENTS IN THE ADMINISTRATIVE REPORT QUOTED ABOVE IT IS OUR VIEW THAT THE ELECTRICAL EQUIPMENT TO BE FURNISHED IN THE SUBJECT PROJECT IS SUBJECT TO THESE PROVISIONS RATHER THAN TO THE SUBCONTRACTOR LISTING REQUIREMENTS OF THE IFB.

WE THEREFORE CONCLUDE THAT THE BID OF FISCHBACH AND MOORE WAS RESPONSIVE TO THE SUBCONTRACTOR ..END :