B-170447, OCT. 28, 1970

B-170447: Oct 28, 1970

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THE SELECTION OF THE LOW PROPOSER ON THE BASIS OF COST WILL NOT BE INTERFERRED WITH IN THE ABSENCE OF ANY EVIDENCE OF FRAUD. INCORPORATED: REFERENCE IS MADE TO YOUR TELEFAX DATED JULY 24. THAT ITS FIRST THREE CHOICES WERE. THE REGIONAL OFFICE ALSO STATED: "WE FEEL THAT THE CIVIC DEVELOPERS PROPOSAL PROVIDES AMENITIES AND QUALITY OF CONSTRUCTION COMPARABLE TO ANY OF THE PROPOSALS WHICH ARE CONSIDERABLY HIGHER IN COST. THERE ARE SOME DEFICIENCIES IN THE FLOOR PLANS BUT THESE SHOULD BE CAPABLE OF REVISION WITHOUT ANY INCREASE IN COST. TOTAL COST OF THE ZIMMERMANN PROPOSAL WAS $21. THEREAFTER THERE WERE EXCHANGES OF CORRESPONDENCE AND OTHER COMMUNICATIONS BETWEEN THE LAC DU FLAMBEAU CHIPPEWA HOUSING AUTHORITY AND THE CHICAGO REGIONAL OFFICE CONCERNING THE SELECTION OF A DEVELOPER.

B-170447, OCT. 28, 1970

BID PROTEST - FEDERALLY FINANCED TURNKEY HOUSING PROJECT - CONTRACTOR SELECTION DENIAL OF PROTEST AGAINST ALLEGED INTERFERENCE BY CHICAGO REGIONAL OFFICE, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, IN THE SELECTION OF CIVIC DEVELOPERS, LOW PROPOSER FOR LOW RENT TURNKEY HOUSING PROJECT AND EXCLUSION OF ZIMMERMAN BROTHERS, INC., FIFTH LOW BIDDER, THE FIRM THAT HAD BEEN PREFERRED BY THE LOCAL HOUSING AUTHORITY, LAC DU FLAMBEAU CHIPPEWA HOUSING AUTHORITY. WHERE REGIONAL HOUSING OFFICE REJECTS LOCAL HOUSING AUTHORITY'S SELECTION OF FIFTH LOW PROPOSER FOR A TURNKEY HOUSING PROJECT AND INDICATES THAT IT WOULD NOT APPROVE OTHER THAN THE LOW PROPOSER, ON THE BASIS OF A UNIT COST $4,500 LESS THAN PROTESTANT'S, THE SELECTION OF THE LOW PROPOSER ON THE BASIS OF COST WILL NOT BE INTERFERRED WITH IN THE ABSENCE OF ANY EVIDENCE OF FRAUD, BAD FAITH, CAPRICIOUSNESS, OR ABUSE OF AUTHORITY.

TO ZIMMERMANN BROTHERS, INCORPORATED:

REFERENCE IS MADE TO YOUR TELEFAX DATED JULY 24, 1970, AND YOUR LETTER OF AUGUST 20, 1970, WITH ENCLOSURE, PROTESTING AWARD OF A CONTRACT TO ANY FIRM OTHER THAN YOUR OWN UNDER REQUEST FOR PROPOSALS ON THE CHIPPEWA HOUSING AUTHORITY PROJECT AT LAC DU FLAMBEAU, WISCONSIN.

IN RESPONSE TO AN ADVERTISEMENT BY THE LAC DU FLAMBEAU CHIPPEWA HOUSING AUTHORITY FOR DEVELOPMENT OF THE LOW-RENT HOUSING UNITS, ELEVEN DEVELOPERS SUBMITTED "TURNKEY" PROPOSALS TO THE HOUSING AUTHORITY. ON APRIL 1, 1970, THE HOUSING AUTHORITY OPENED THE PROPOSALS AND, AS REQUIRED, INDICATED TO THE CHICAGO REGIONAL OFFICE OF THE FEDERAL HOUSING ADMINISTRATION, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, THAT ITS FIRST THREE CHOICES WERE, IN ORDER OF PREFERENCE, ZIMMERMANN BROTHERS, NAMEKAGON DEVELOPERS, AND MURRAY ENTERPRISES, INCORPORATED. THE RECORD SHOWS THAT CIVIC DEVELOPERS SUBMITTED THE LOWEST PRICE PROPOSAL; MURRAY ENTERPRISES THE SECOND LOW; NAMEKAGON DEVELOPERS THE THIRD LOW; AND ZIMMERMANN BROTHERS THE FIFTH LOW.

IN ITS LETTER DATED APRIL 14, 1970, TO THE REGIONAL OFFICE, REPORTING ITS SELECTION AND RECOMMENDATIONS, THE LAC DU FLAMBEAU CHIPPEWA HOUSING AUTHORITY STATED ITS REASONS FOR SELECTING ZIMMERMANN BROTHERS AS DEVELOPERS AS FOLLOWS:

"1. GROSS AREA SPACE.

2.TIME OF CONSTRUCTION ELEMENT VERY GOOD.

3. FLOOR PLAN VERY DESIRABLE.

4. FLEXIBILITY OF FLOOR DESIGN.

5. VERY GOOD KNOWLEDGE OF CONSTRUCTION PROBLEMS IN OUR AREA." IT STATED ITS REASONS FOR UNFAVORABLE CONSIDERATION OF THE LOW PROPOSER AS:

"1. UNDESIRABLE FLOOR PLAN.

2. EXTREMELY LOW COSTS QUESTIONABLE.

3. NO KNOWN CONSTRUCTION IN THIS AREA BY CIVIC DEVELOPERS.

4. INITIAL PROPOSAL LEFT MUCH TO BE DESIRED."

THE RECORD BEFORE US SHOWS THAT THE CHICAGO REGIONAL OFFICE DID NOT CONCUR WITH THE LOCAL HOUSING AUTHORITY'S PREFERRED CHOICES BECAUSE OF COST CONSIDERATIONS. BY LETTER DATED MAY 13, 1970, THE REGIONAL OFFICE ADVISED THE LOCAL HOUSING AUTHORITY OF ITS NONCURRENCE IN THE HOUSING AUTHORITY'S CHOICES AND AFTER REVIEW OF ALL PROPOSALS SUBMITTED, RECOMMENDED SELECTION OF THE PROPOSAL OF CIVIC DEVELOPERS. THE REGIONAL OFFICE ALSO STATED:

"WE FEEL THAT THE CIVIC DEVELOPERS PROPOSAL PROVIDES AMENITIES AND QUALITY OF CONSTRUCTION COMPARABLE TO ANY OF THE PROPOSALS WHICH ARE CONSIDERABLY HIGHER IN COST. THERE ARE SOME DEFICIENCIES IN THE FLOOR PLANS BUT THESE SHOULD BE CAPABLE OF REVISION WITHOUT ANY INCREASE IN COST. IT SHOULD BE NOTED THAT THE CIVIC DEVELOPERS PROPOSAL ALLOWS FOR MORE ACTUAL SQUARE FEET OF LIVING SPACE THAN ANY OF THE NEXT FIVE PROPOSALS." TOTAL COST OF THE ZIMMERMANN PROPOSAL WAS $21,523 PER DWELLING UNIT AS COMPARED TO $17,005 PER DWELLING UNIT FOR THE CIVIC DEVELOPERS' PROPOSAL, A DIFFERENCE IN PROJECT COST OF $180,720.

THEREAFTER THERE WERE EXCHANGES OF CORRESPONDENCE AND OTHER COMMUNICATIONS BETWEEN THE LAC DU FLAMBEAU CHIPPEWA HOUSING AUTHORITY AND THE CHICAGO REGIONAL OFFICE CONCERNING THE SELECTION OF A DEVELOPER. IN A LETTER DATED ON OR ABOUT AUGUST 19, 1970, THE DIRECTOR, PRODUCTION DIVISION, OF THE CHICAGO REGIONAL OFFICE, ADVISED THE LOCAL HOUSING AUTHORITY THAT:

"AS STATED IN OUR LETTER OF MAY 13, 1970, WE RECOMMENDED THE SELECTION OF CIVIC DEVELOPERS CORPORATION OF GREENFIELD, WISCONSIN AS DEVELOPER OF YOUR PROJECT OR THAT YOUR AUTHORITY PROVIDE US WITH ADEQUATE REASONS FOR NOT ACCEPTING CIVIC DEVELOPERS PROPOSAL.

"YOUR LETTERS OF JUNE 11 AND JULY 24 DO NOT JUSTIFY ACCEPTING ANY OTHER PROPOSAL. WE REAFFIRM OUR POSITION THAT THE CIVIC DEVELOPER'S PROPOSAL PROVIDES QUALITY OF CONSTRUCTION COMPARABLE OF ANY OF THE OTHER PROPOSALS AND AT LESS COST.

"YOU ARE AGAIN ENCOURAGED TO ACCEPT CIVIC DEVELOPER'S PROPOSAL. IF YOU REFUSE TO ACCEPT THEIR PROPOSAL, THE 40 UNITS DESIGNATED AS YOUR PROJECT WILL BE WITHDRAWN AND ALLOCATED TO ANOTHER COMMUNITY. AVAILABLE FUNDS FOR LOW-RENT HOUSING ARE AT A MINIMUM THIS FISCAL YEAR AND IF WE CANNOT PROCEED WITH DEVELOPMENT OF THIS PROJECT IMMEDIATELY WE WILL BE FORCED TO REALLOCATE THOSE FUNDS RESERVED FOR YOUR PROJECT."

ON AUGUST 21, 1970, THE LOCAL HOUSING AUTHORITY FORWARDED TO THE CHICAGO REGIONAL OFFICE A COPY OF ITS RESOLUTION NAMING CIVIC DEVELOPERS AS THEIR SELECTION AS DEVELOPER OF THE CITED TURNKEY PROJECT. IT MAY BE NOTED THAT THE RESOLUTION RECITES THAT ACCEPTANCE OF CIVIC DEVELOPERS "IS BEING MADE UNDER PROTEST".

THE GIST OF YOUR COMPLAINT IS THAT THE CHICAGO REGIONAL OFFICE IMPROPERLY INTERFERED IN THE SELECTION OF THE DEVELOPER, THAT IT HAD NO RIGHT TO OVERRULE THE LOCAL HOUSING AUTHORITY; AND THAT AMPLE FUNDS WERE AVAILABLE TO COVER THE COST OF YOUR PROPOSAL. YOU ALSO CONTEND THAT YOUR PROPOSED DWELLINGS ARE FAR SUPERIOR TO THE TYPE SELECTED BY THE CHICAGO REGIONAL OFFICE WHICH, IN YOUR OPINION, IS INADEQUATE FOR THE NORTHERN CLIMATE OF THE HOUSING SITE.

UNDER THE "TURNKEY" METHOD OF PROVIDING LOW-RENT PUBLIC HOUSING A PRIVATE DEVELOPER OR BUILDER IS PERMITTED TO DEAL WITH A LOCAL HOUSING AUTHORITY IN ESSENTIALLY THE SAME WAY AS HE IS ACCUSTOMED TO DEALING WITH HIS PRIVATE CLIENTS. UNDER THIS METHOD A DEVELOPER WHO HAS A SITE OR AN OPTION ON A SITE, OR CAN OBTAIN ONE, MAY APPROACH THE LOCAL HOUSING AUTHORITY, OR RESPOND TO A REQUEST FOR PROPOSAL, WITH A PROPOSAL TO BUILD A PUBLIC HOUSING PROJECT IN ACCORDANCE WITH PLANS AND SPECIFICATIONS PREPARED BY HIS OWN ARCHITECT AND TO A STANDARD OF GOOD DESIGN, QUALITY, AND WORKMANSHIP. IF THE DEVELOPER'S PROPOSAL IS ACCEPTABLE TO THE LOCAL HOUSING AUTHORITY AND APPROVED BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, THE DEVELOPER AND THE LOCAL HOUSING AUTHORITY ENTER INTO A CONTRACT UNDER WHICH THE LOCAL HOUSING AUTHORITY AGREES TO PURCHASE THE COMPLETED DEVELOPMENT. THIS CONTRACT IS BACKED BY THE FINANCIAL ASSISTANCE COMMITMENT OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. THE AUTHORITY FOR CARRYING OUT THE DEPARTMENT'S ACTIVITIES HAS BEEN DELEGATED TO SEVEN REGIONAL ADMINISTRATORS.

WHILE THE DEVELOPMENT AND ADMINISTRATION OF FEDERALLY SUBSIDIZED LOW RENT HOUSING PROJECTS ARE PRIMARILY THE RESPONSIBILITY OF THE LOCAL HOUSING AUTHORITIES, THE REGIONAL OFFICES OF THE DEPARTMENT HAVE A VITAL INTEREST IN THE SELECTION OF THE DEVELOPER. COST IS A VERY IMPORTANT PART IN THE CONSIDERATION OF A PROJECT. ALTHOUGH THE REGIONAL OFFICE MAY HAVE INDICATED AN OVERALL AMOUNT AVAILABLE FOR THE PROJECT, (DEVELOPMENT COST BUDGET), THE FINAL COST IS PARAMOUNT SINCE THIS FIGURE WILL DETERMINE THE AMOUNT OF CONTRIBUTIONS IN THE ANNUAL CONTRIBUTION CONTRACT BETWEEN THE LOCAL HOUSING AUTHORITY AND THE GOVERNMENT. WHEN PROJECT HOUSING AUTHORITY AS THE ONLY PROPOSER ACCEPTABLE IN THE PROGRAM. CONSTRUCTION COSTS ARE MINIMIZED, THE AMOUNT OF ANNUAL CONTRIBUTIONS IS ALSO MINIMIZED. IN ADDITION, WHERE THE COSTS ARE MINIMIZED ON ONE PROJECT, IT NECESSARILY FOLLOWS THAT ADDITIONAL SUMS ARE AVAILABLE FOR OTHER PROJECTS.

IT MAY BE POINTED OUT THAT THE INITIAL SELECTION OF A DEVELOPER IS A TENTATIVE SELECTION AND DOES NOT INDICATE THAT THE DEVELOPER'S PRICES FOR THE SITE AND CONSTRUCTION ARE ACCEPTABLE BUT ONLY THAT THEY DO NOT APPEAR TO EXCEED AN UPPER LIMIT FOR NEGOTIATING PURPOSES. SEE IN THIS REGARD THE LOW-RENT HOUSING TURNKEY HANDBOOK, JUNE 1969, RHA 7420.1 ISSUED BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. THE ACTUAL NEGOTIATION OF THE FINAL PRICE IS ACCOMPLISHED AT A LATER DATE AT A NEGOTIATION CONFERENCE.

SINCE IT IS GOVERNMENT MONEY WHICH MAKES THE PROJECT POSSIBLE, THE GOVERNMENT'S REPRESENTATIVES SEEK TO OBTAIN FOR THE LOCAL HOUSING AUTHORITIES THE MAXIMUM HOUSING MEETING PRESET MINIMUM STANDARDS AT THE LEAST COST TO THE GOVERNMENT IN ORDER TO SPREAD THE BENEFIT OF THE PROGRAMS OVER A WIDER AREA. IN THE PRESENT CASE IT APPEARS THAT THE CHICAGO REGIONAL OFFICE IS ATTEMPTING TO ACCOMPLISH THIS RESULT. THERE IS NO QUESTION THAT YOUR PROPOSAL, AT AN APPROXIMATE INCREASE IN COST OF $4,500 PER DWELLING UNIT, CONTAINS FEATURES NOT CONTAINED IN THE LOWER COST PROPOSALS. WHETHER THESE FEATURES ARE DESIRABLE, NECESSARY OR ECONOMICAL IN A LOW-COST HOUSING PROJECT IS A MATTER OF JUDGMENT; HENCE, THE NECESSITY FOR THE REQUIREMENT THAT THE LOCAL HOUSING AUTHORITY JUSTIFY TO THE REGIONAL OFFICE THE SELECTION OF YOUR FIRM. IN THE JUDGMENT OF THE REGIONAL OFFICE YOUR SELECTION, ON THE BASIS OF THE INCREASED PROPOSED COST PER DWELLING UNIT WAS NOT JUSTIFIED, AND ON THE BASIS OF COST CONSIDERATIONS, THE LOWEST COST PROPOSER WAS RECOMMENDED TO THE LOCAL

SINCE THIS IS A MATTER OF JUDGMENT, WE WILL NOT SUBSTITUTE OUR JUDGMENT OR QUESTION THE REGIONAL OFFICE'S JUDGMENT IN THE ABSENCE OF FRAUD, BAD FAITH, CAPRICIOUSNESS OR ABUSE OF AUTHORITY BY THE CHICAGO REGIONAL OFFICE. NOR DO WE FIND ANYTHING IMPROPER OR ILLEGAL IN THE ACTIONS OF THE REGIONAL OFFICE SINCE THE PROCEDURES OF THE DEPARTMENT WERE FOLLOWED.

IN THE CIRCUMSTANCES, WE MUST DENY YOUR PROTEST.