B-173061, JUL 30, 1971, 51 COMP GEN 72

B-173061: Jul 30, 1971

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DETERMINATIONS - FAILURE TO ISSUE THE AWARD OF A COST-PLUS-AWARD-FEE CONTRACT FOR OPERATIONAL SUPPORT AND MAINTENANCE OF THE PACIFIC MISSILE RANGE INSTRUMENTATION FACILITY TO OTHER THAN THE INCUMBENT CONTRACTOR ON THE BASIS OF THE LOWEST POTENTIAL COST EXPOSURE TO THE GOVERNMENT WAS NOT ILLEGAL UNDER THE SERVICE CONTRACT ACT OF 1965. AS THE REFUSAL IS NOT ATTRIBUTABLE TO ANY MISFEASANCE OR NONFEASANCE ON THE PART OF THE CONTRACTING AGENCY. THE FAILURE TO INCLUDE A WAGE DETERMINATION IN THE REQUEST FOR PROPOSALS WILL NOT AFFECT THE VALIDITY OF THE CONTRACT. LACK OF A WAGE DETERMINATION WAS NOT PREJUDICIAL TO THE INCUMBENT CONTRACTOR. THE POSSIBILITY OF LABOR STRIFE IS CONJECTURAL. LABOR COST OVERRUNS WILL BE BORNE BY THE NEW CONTRACTOR TO WHOM THE "SUCCESSOR EMPLOYER" DOCTRINE IS INAPPLICABLE AS THE FORMER CONTRACTOR HAD NO BARGAINING AGREEMENT.

B-173061, JUL 30, 1971, 51 COMP GEN 72

CONTRACTS - LABOR STIPULATIONS - SERVICE CONTRACT ACT OF 1965 - MINIMUM WAGE, ETC., DETERMINATIONS - FAILURE TO ISSUE THE AWARD OF A COST-PLUS-AWARD-FEE CONTRACT FOR OPERATIONAL SUPPORT AND MAINTENANCE OF THE PACIFIC MISSILE RANGE INSTRUMENTATION FACILITY TO OTHER THAN THE INCUMBENT CONTRACTOR ON THE BASIS OF THE LOWEST POTENTIAL COST EXPOSURE TO THE GOVERNMENT WAS NOT ILLEGAL UNDER THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351, NOTWITHSTANDING THE DEPARTMENT OF LABOR WITHIN ITS DISCRETIONARY AUTHORITY REFUSED TO ISSUE A WAGE DETERMINATION, AND AS THE REFUSAL IS NOT ATTRIBUTABLE TO ANY MISFEASANCE OR NONFEASANCE ON THE PART OF THE CONTRACTING AGENCY, THE FAILURE TO INCLUDE A WAGE DETERMINATION IN THE REQUEST FOR PROPOSALS WILL NOT AFFECT THE VALIDITY OF THE CONTRACT. FURTHERMORE, LACK OF A WAGE DETERMINATION WAS NOT PREJUDICIAL TO THE INCUMBENT CONTRACTOR, THE POSSIBILITY OF LABOR STRIFE IS CONJECTURAL, AND LABOR COST OVERRUNS WILL BE BORNE BY THE NEW CONTRACTOR TO WHOM THE "SUCCESSOR EMPLOYER" DOCTRINE IS INAPPLICABLE AS THE FORMER CONTRACTOR HAD NO BARGAINING AGREEMENT.

TO ARNOLD & PORTER, JULY 30, 1971:

FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF KENTRON HAWAII, LTD. (KENTRON), AGAINST THE AWARD OF A COST-PLUS-AWARD-FEE CONTRACT TO DYNALECTRON CORPORATION (DYNALECTRON), UNDER SOLICITATION NO. N00123-71-R- 0076, ISSUED BY THE NAVY REGIONAL PURCHASING OFFICE, LOS ANGELES (NRPOLA).

THE SUBJECT SOLICITATION, ISSUED ON AUGUST 21, 1970, REQUIRES THE SUCCESSFUL OFFEROR TO PROVIDE OPERATIONAL SUPPORT AND MAINTENANCE OF THE PACIFIC MISSILE RANGE INSTRUMENTATION FACILITIES LOCATED AT BARKING SANDS, KAUAI, HAWAII, AND AT OTHER REMOTE PACIFIC ISLANDS. IT IS REPORTED THAT THE FACILITIES ARE PRIMARILY UTILIZED FOR SUPPORT OF MISSILE TEST FLIGHTS. THE RECORD REFLECTS THAT ON AUGUST 5, 1970, A STANDARD FORD 98, "NOTICE OF INTENTION TO MAKE A SERVICE CONTRACT" WAS FORWARDED BY NRPOLA TO THE DEPARTMENT OF LABOR. ON SEPTEMBER 3, 1970, A REPRESENTATIVE OF THE DEPARTMENT OF LABOR ADVISED NRPOLA THAT NO WAGE DETERMINATION WAS APPLICABLE, AND THAT NONE WOULD BE MADE. WRITTEN CONFIRMATION THAT "NO WAGE DETERMINATION APPLICABLE TO THE SPECIFIED LOCALITY AND CLASSES OF SERVICE EMPLOYEES HAS BEEN MADE" WAS GIVEN BY THE DEPARTMENT OF LABOR ON SEPTEMBER 8, 1970. ON OCTOBER 15, 1970, NRPOLA ADVISED KENTRON OF THE DECISION BY THE DEPARTMENT OF LABOR, AND INDICATED THAT NO WAGE DETERMINATION WOULD BE INCLUDED IN THE RFP.

SEVEN RESPONSES TO THE RFP WERE RECEIVED BY OCTOBER 26, 1970. ANALYSIS OF THESE PROPOSALS DISCLOSED THAT ONLY KENTROM, DYNALECTRON, AND THE BENDIX CORPORATION WERE CONSIDERED TO BE WITHIN THE COMPETITIVE RANGE, CONSIDERING TRADE-OFF BETWEEN PRICE AND TECHNICAL ACCEPTABILITY. FOLLOWING NEGOTIATIONS DURING THE LATTER PART OF FEBRUARY 1971, NRPOLA REQUESTED BY LETTER OF MARCH 1, 1971, THAT OFFERORS SUBMIT THEIR BEST AND FINAL OFFERS NO LATER THAN MARCH 19, 1971. THIS REQUEST EXPRESSLY ADVISED THAT "MAXIMUM LABOR RATES SHOULD CONTAIN ANY COST CONTINGENCY YOU CONSIDER NECESSARY WITH DUE REGARD TO THE UNIONIZATION ACTIVITIES IN PROCESS AND/OR PENDING AS DISCUSSED AT OUR MEETING." THE LETTER ALSO REMINDED OFFERORS THEY WERE REQUIRED TO AGREE TO MAXIMUM LABOR RATES, AND THAT COST EXPOSURE WOULD BE A SIGNIFICANT FACTOR IN DETERMINING WHO SHOULD RECEIVE THE AWARD. UNDER THIS PROVISION, IF THE CONTRACTOR EXCEEDS HIS MAXIMUM WAGE RATES, ANY EXCESS COST WOULD BE UNALLOWABLE, AND WOULD NOT BE REIMBURSED BY THE GOVERNMENT. SINCE THERE WAS NO SIGNIFICANT DIFFERENCE AMONG THE THREE OFFERORS IN THE AREA OF TECHNICAL APPROACH, THE AWARD WAS MADE TO DYNALECTRON ON MAY 21, 1971, ON THE BASIS OF THE LOWEST POTENTIAL COST EXPOSURE TO THE GOVERNMENT, WITH CONTRACT PERFORMANCE TO COMMENCE ON AUGUST 1, 1971.

KENTRON'S PROTEST, IN WHICH THE INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS (IBEW), AFL-CIO, JOINS, ARISES OUT OF THE UNIONIZATION ACTIVITIES REFERRED TO IN THE NRPOLA LETTER OF MARCH 1, 1971. IT IS THE POSITION OF KENTRON AND IBEW THAT:

1. THE DEPARTMENT OF LABOR WAS REQUIRED TO ISSUE A WAGE RATE DETERMINATION, AND KENTRON WAS PREJUDICED BY THE LACK OF A WAGE RATE DETERMINATION IN THE RFP.

2. DYNALECTRON'S PROPOSAL WAS NONRESPONSIVE IN THAT IT CONTEMPLATED NO MATERIAL INCREASE IN LABOR RATES DURING THE NEXT FIVE YEARS, AND THAT THE AWARD IN QUESTION WILL LIKELY RESULT IN A LABOR STRIKE WHICH WILL THREATEN THE OPERATION OF THE RANGE, AND

3. THE DEPARTMENT OF THE NAVY WILL ULTIMATELY BEAR THE COST OF DYNALECTRON'S UNREALISTIC LABOR PROJECTION.

IT IS UNDISPUTED FROM THE RECORD THAT IBEW HAS CERTIFIED IN APRIL 1971 AS THE COLLECTIVE BARGAINING AGENT FOR APPROXIMATELY 234 OF THE 375 EMPLOYEES OF KENTRON, THE INCUMBENT CONTRACTOR AT THE PACIFIC MISSILE RANGE, KENTRON HAVING OPERATED AND MAINTAINED THE RANGE FOR THE PAST 10 YEARS. WHILE KENTRON HAD NOT YET REACHED A COLLECTIVE BARGAINING AGREEMENT WITH THE UNION AT THE TIME THE RFP WAS ISSUED, IT NOTED IN ITS LETTER OF SEPTEMBER 29, 1970, TO THE CONTRACTING OFFICER:

THE WAGE DETERMINATION IS URGENTLY NEEDED AND WOULD BE UTILIZED AS A BASELINE FOR CONDUCTING OUR AGREEMENT NEGOTIATIONS WITH THE PRESENT AND PROPOSED UNIONS. WE ARE PRESENTLY IN THE PRELIMINARY STAGES OF NEGOTIATIONS WITH THE INLANDBOATMEN'S UNION AND WE DO NOT HAVE THE CURRENT WAGE SURVEY INFORMATION TO USE IN NEGOTIATIONS.

*** THE CONTRACTOR BELIEVES THIS RFP SHOULD BE AMENDED TO INCORPORATE THE RESULTING WAGE DETERMINATION. IT WILL BE VERY DIFFICULT FOR THE GOVERNMENT TO CONDUCT A FAIR AND IMPARTIAL COMPETITIVE PROCUREMENT WITHOUT A WAGE DETERMINATION CONSIDERING THAT THE LABOR RATES MUST BE REVISED TO INCORPORATE THE UNION AGREEMENTS NEGOTIATED BY THE INCUMBENT CONTRACTOR.

IN RESPONSE TO THE SEPTEMBER 29 LETTER, THE NRPOLA ADVISED KENTRON IN ITS LETTER OF OCTOBER 15, 1970:

YOUR REQUEST THAT A WAGE DETERMINATION BE ISSUED AND INCORPORATED INTO THE CURRENT CONTRACT HAS BEEN CAREFULLY CONSIDERED. A REVIEW OF THE SITUATION WITH THE DEPARTMENT OF LABOR INDICATES THAT THE PREPONDERANCE OF LABOR CATEGORIES HAVE NEVER BEEN COVERED BY ANY RATE DETERMINATION. ANY EFFORT TO "CONFORM" SUCH LABOR CATEGORIES INTO SOME "REASONABLE" RELATIONSHIP TO LABOR CATEGORIES ALREADY COVERED UNDER OTHER CONTRACT DETERMINATIONS WOULD INJECT THE GOVERNMENT INTO THE LABOR-MANAGEMENT NEGOTIATION PROCESS SINCE A RATE-SETTING EFFECT WOULD BE UNAVOIDABLE. IS THE POLICY OF THE NAVY TO AVOID ANY INTERFERENCE WITH THE BARGAINING PROCESS AND FREE INTERPLAY OF LABOR MARKET FORCES.

THIS OFFICE WILL REMAIN IN CLOSE TOUCH WITH DEVELOPMENTS DURING THE CURRENT PROCUREMENT EFFORT, PARTICULARLY THE OUTCOME OF THE PROSPECTIVE UNION ELECTIONS WHOSE IMPACT CANNOT BE ASSESSED WITH ANY DEGREE OF ACCURACY AT THIS TIME. SHOULD DEVELOPMENT WARRANT A SPECIFIC COURSE OF ACTION TO PROTECT THE INTERESTS OF THE GOVERNMENT AND TO FACILITATE A FAIR AND IMPARTIAL NEGOTIATION SUCH ACTION WILL BE PROMPTLY TAKEN.

UNDER THESE CIRCUMSTANCES YOU URGE THAT THE DEPARTMENT OF LABOR SHOULD HAVE MADE A WAGE SURVEY AND DETERMINATION AS REQUESTED BY KENTRON AND NRPOLA LONG BEFORE THE PRESENT SOLICITATION WAS EVEN ISSUED. THIS, YOU CONTEND, WOULD HAVE SATISFIED THE REQUIREMENTS OF PARAGRAPHS 12-1005.2 AND 12-1005.3 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) FOR REQUESTING A WAGE RATE DETERMINATION AND INCLUDING IT IN THE RFP, AND WOULD HAVE AVOIDED PLACING KENTRON IN THE TENUOUS POSITION OF NEGOTIATING WAGE RATES AS THE SAME TIME THAT IT WAS NEGOTIATING ITS CONTRACT WITH NAVY. YOU ALSO CONTEND THAT KENTRON'S SITUATION WAS AGGRAVATED, AND THE COMPANY WAS CLEARLY PREJUDICED AS THE INCUMBENT CONTRACTOR, WHEN IN LATE FEBRUARY AND EARLY MARCH 1971, JUST A FEW WEEKS BEFORE BEST AND FINAL OFFERS WERE DUE, OUR OFFICE RENDERED ITS DECISION 50 COMP. GEN. 592, FEBRUARY 26, 1971, AND THE NATIONAL LABOR RELATIONS BOARD (NLRB), RENDERED ITS DECISION IN EMERALD MAINTENANCE, INC., 188 NLRB NO. 139, MARCH 5, 1971. YOU INTERPRET BOTH OF THOSE DECISIONS AS HOLDING THAT THE "SUCCESSOR EMPLOYER" DOCTRINE, UNDER WHICH AN EMPLOYER WHO UNDERTAKES TO PERFORM WORK PERFORMED BY A PREVIOUS COMPANY AND EMPLOYS THE SAME WORKERS IS BOUND TO THE TERM OF ITS PREDECESSOR'S COLLECTIVE BARGAINING AGREEMENT, IS NOT APPLICABLE IN GOVERNMENT CONTRACTING SITUATIONS. THESE DECISIONS, YOU STATE, PLACED KENTRON IN THE INCONGRUOUS POSTURE OF NEGOTIATING COLLECTIVE BARGAINING AGREEMENTS WHICH WOULD DEFINE THE WAGES IT WOULD HAVE TO PAY DURING THE NEXT CONTRACT PERIOD BUT WHICH WOULD NOT BE LEGALLY BINDING ON EITHER OF ITS COMPETITORS FOR THE PACIFIC MISSILE RANGE CONTRACT. YOU STATE HOWEVER, THAT KENTRON'S NEGOTIATIONS, AS A PRACTICAL MATTER, ARE AS BINDING ON DYNALECTRON AS THEY WOULD HAVE BEEN ON KENTRON, SINCE DYNALECTRON IS A SUCCESSOR EMPLOYER, AND AS SUCH, MUST RECOGNIZE THE INCUMBENT UNION AND CANNOT UNILATERALLY ALTER THE WORKING CONDITIONS, INCLUDING, OF COURSE, WAGES, OF THE EMPLOYEES, WITHOUT GOOD FAITH NEGOTIATIONS WITH THE UNION.

YOU ALSO URGE THAT IN THE CIRCUMSTANCES OF THIS CASE THE ABSENCE OF WAGE DETERMINATION FROM THE INSTANT RFP BY AND OF ITSELF, RENDERED THE CONTRACT ILLEGAL UNDER THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351. ADDITIONALLY YOU CONTEND THAT THE ABSENCE OF THE WAGE DETERMINATION CAN BE DIRECTLY ATTRIBUTED TO THE CARELESSNESS OF THE CONTRACTING OFFICER IN NOT ATTACHING ANY WAGE DATA WHATSOEVER TO THE STANDARD FORM 98 HE FORWARDED TO THE DEPARTMENT OF LABOR. YOU ALSO SUBMIT THAT THE CONTRACTING OFFICER DISREGARDED ASPR 12-1005.2 IN THAT HE DID NOT FILE STANDARD FORM 98 WITHIN THE TIME PERIOD SPECIFIED THEREIN.

THERE IS NO QUESTION AS TO APPLICABILITY OF THE SERVICE CONTRACT ACT OF 1965, AND THE REFERENCED REGULATIONS PROMULGATED THEREUNDER, TO THE INSTANT PROCUREMENT. HOWEVER, THE PRINCIPAL QUESTION TO BE ANSWERED, AS WE VIEW IT, IS WHETHER THE ACT REQUIRES THE ISSUANCE OF A WAGE DETERMINATION IN ALL CASES WHERE THE CONTRACT BEING AWARDED IS COVERED BY THE ACT, AND WAGE RATE IS REQUESTED BY THE CONTRACTING AGENCY. PREVIOUSLY OBSERVED IN OUR DECISION REPORTED AT 46 COMP. GEN. 278 (1966), BY REASON OF THE PROVISIONS OF SECTION 4(B) OF PUBLIC LAW 89 286, 41 U.S.C. 353(B), THE SECRETARY OF LABOR IS AUTHORIZED TO MAKE SUCH RULES AND REGULATIONS ALLOWING REASONABLE VARIATIONS, TOLERANCES AND EXEMPTIONS TO AND FROM ALL OR ANY PROVISIONS OF THE ACT AS HE MAY FIND NECESSARY AND PROPER. BY SECRETARY'S ORDER NO. 36-65, THAT AUTHORITY WAS DELEGATED TO THE ADMINISTRATOR OF THE WAGE AND HOUR AND PUBLIC CONTRACTS DIVISION (NOW WORKPLACE STANDARDS ADMINISTRATION). PURSUANT THERETO THE ADMINISTRATOR HAS ISSUED THE REGULATION SET OUT AT 29 CFR 4.5(B), WHICH EXEMPTS FROM THE WAGE AND FRINGE BENEFITS SECTION OF THE ACT THOSE CONTRACTS FOR WHICH NO PREVAILING WAGE AND FRINGE BENEFITS HAVE BEEN DETERMINED FOR ANY CLASS OF SERVICE EMPLOYEES TO BE EMPLOYED THEREUNDER. LIKEWISE, ASPR 12-1005.1 REFLECTS THE RESPONSIBILITY OF THE SECRETARY OF LABOR AS THE PARTY "AUTHORIZED AND DIRECTED TO ADMINISTER AND ENFORCE THE PROVISIONS OF THE ACT, TO MAKE RULES AND REGULATIONS, ISSUE ORDERS, MAKE DECISIONS, AND TAKE OTHER APPROPRIATE ACTIONS UNDER THE ACT."

ACTING UNDER THIS AUTHORITY THE DEPARTMENT OF LABOR DECLINED TO ISSUE A WAGE DETERMINATION IN THE INSTANT CASE. IT IS REPORTED, HOWEVER, THAT ON SEPTEMBER 14, 1970, THE NEGOTIATOR FOR NRPOLA CALLED THE DEPARTMENT OF LABOR AND INQUIRED AS TO THE REASON FOR THE FAILURE OF THE DEPARTMENT TO ISSUE A WAGE DETERMINATION. HE WAS ADVISED THAT WERE A DETERMINATION TO BE MADE, IT WOULD COVER ONLY A PORTION OF THE APPLICABLE LABOR CATEGORIES (APPROXIMATELY ONE-THIRD) AND THAT, FOR IT TO BE USEFUL, THE NAVY WOULD BE REQUIRED (PRESUMABLY IN ITS EVALUATION OF OFFERS) TO INTERPOLATE FROM SUCH A DETERMINATION COMPATIBLE RATES FOR THE NONCOVERED CATEGORIES. SUCH INTERPOLATIONS, IT WAS FELT, WOULD HAVE CONSTITUTED FIXED RATIOS BETWEEN THE TWO CLASSES OF LABOR CATEGORIES (THOSE WHO WERE AND THOSE WHO WERE NOT COVERED BY THE DEPARTMENT OF LABOR DETERMINATION), WHICH WOULD HAVE HAD THE EFFECT OF "RATE SETTING" BY THE NAVY AND WOULD HAVE BEEN AN IMPROPER INJECTION OF THE GOVERNMENT INTO THE NEGOTIATIONS THEN UNDERWAY. THE DEPARTMENT OF LABOR STRONGLY ADVISED, AND THE DEPARTMENT OF THE NAVY CONCURRED, THAT IN LIGHT OF THESE EFFECTS, A WAGE DETERMINATION WOULD BE INADVISABLE.

IRRESPECTIVE OF WHETHER THIS OFFICE AGREES WITH THE REASONING ON WHICH THE DECISION NOT TO ISSUE A WAGE RATE DETERMINATION WAS MADE, IT IS OUR OPINION THAT SUCH DECISIONS ARE WITHIN THE DISCRETION OF THE DEPARTMENT OF LABOR IN EACH INDIVIDUAL CASE. WHERE, AS IN THE INSTANT CASE, THE DEPARTMENT DECLINES TO ISSUE A DETERMINATION, AND SUCH DECLINATION IS NOT ATTRIBUTABLE TO ANY MISFEASANCE OR NONFEASANCE ON THE PART OF THE CONTRACTING AGENCY, IT IS OUR FURTHER OPINION THAT THE FAILURE TO INCLUDE A WAGE RATE DETERMINATION IN THE RFP AND IN THE RESULTING CONTRACT WILL NOT AFFECT THE VALIDITY OF THE CONTRACT.

CONCERNING YOUR ARGUMENT THAT THE CONTRACTING OFFICER DID NOT FILE STANDARD FORM 98 WITHIN THE TIME PERIOD SPECIFIED BY ASPR 12-1005.2, WE THINK IT SUFFICIENT TO OBSERVE THAT SECTION (A) OF THAT PARAGRAPH PROVIDES "NOT LESS THAN THIRTY DAYS PRIOR TO ANY INVITATION FOR BIDS OR THE COMMENCEMENT OF NEGOTIATIONS FOR ANY CONTRACT EXCEEDING $2500 WHICH MAY BE SUBJECT TO THE ACT *** THE CONTRACTING OFFICER SHALL FILE STANDARD FORM 98 *** ." THEREFORE, CONSIDERING THE FACT THAT A STANDARD FORM 98 WAS SUBMITTED SOME 16 DAYS PRIOR TO THE ISSUANCE OF THE RFP WE FIND THAT NO VIOLATION OF THAT QUOTED PARAGRAPH OCCURRED.

WITH RESPECT TO YOUR CONTENTION THAT LABOR'S FAILURE TO ISSUE A DETERMINATION IS ATTRIBUTABLE TO THE CONTRACTING OFFICER'S FAILURE TO SUBMIT WAGE RATE INFORMATION WITH THE STANDARD FORM 98, THERE IS NOTHING IN THE RECORD AS SUBMITTED BY NAVY, OR IN THE REPORT FORWARDED TO THIS OFFICE BY THE DEPARTMENT OF LABOR, TO INDICATE THAT THE LACK OF WAGE RATE INFORMATION WITH THE STANDARD FORM 98 CONTRIBUTED TO, OR RESULTED IN, LABOR'S FAILURE TO ISSUE A WAGE RATE DETERMINATION. WE THEREFORE SEE NO MISFEASANCE OR NONFEASANCE ON NAVY'S PART IN ITS REQUEST FOR A WAGE RATE DETERMINATION WHICH MIGHT AFFECT THE VALIDITY OF THE CONTRACT AWARDED TO DYNALECTRON. YOU ALSO CONTEND THAT KENTRON WAS PLACED AT A COMPETITIVE DISADVANTAGE BY THE FAILURE TO ISSUE A WAGE RATE, AND BY THE DECISIONS OF THIS OFFICE AND THE NLRB ON THE "SUCCESSOR EMPLOYER" QUESTION. HOWEVER, EVEN IF IT IS ASSUMED THAT DYNALECTRON WOULD BE CONSIDERED A "SUCCESSOR EMPLOYER" UNDER THE RATIONALE OF THE CASES YOU CITE, AS WELL AS UNDER THE RATIONALE IN WILLIAM J. BURNS INTERNATIONAL DETECTIVE AGENCY, INC. V NLRB, 411 F. 2D 911 (2ND CIR., APRIL 26, 1971), AND AS SUCH WOULD BE REQUIRED TO RECOGNIZE THE UNION CHOSEN BY KENTRON EMPLOYEES AND WOULD HAVE THE DUTY OF BARGAINING IN GOOD FAITH WITH THE UNION, KENTRON HAS NO COLLECTIVE BARGAINING AGREEMENT TO WHICH DYNALECTRON COULD BE BOUND, AND ON THAT POINT THE CASES CONCERNING THE DOCTRINE OF A "SUCCESSOR EMPLOYER" ARE THEREFORE INAPPLICABLE.

WE ALSO AGREE THAT DYNALECTRON, UNDER THE RULING OF OVERNIGHT TRANSPORTATION CO. V NLRB, 372 F. 2D 756 (4TH CIR. 1967), MUST AFFORD THE UNION AN OPPORTUNITY TO DISCUSS AND BARGAIN WITH RESPECT TO ANY CHANGES IN THE RATES OF PAY THAT IT MAY WISH TO MAKE. IN THIS CONNECTION, HOWEVER, WE HAVE THOROUGHLY AND CAREFULLY EXAMINED THE COMPARISON OF AVERAGE WAGES PRESENTLY BEING PAID BY KENTRON ($3.59 PER HOUR) AND ITS OFFERED FIRST YEAR'S MAXIMUMS ($3.86 PER HOUR) AND THE MAXIMUM RATE FOR COMPARABLE POSITIONS AGREED UPON IN THE DYNALECTRON CONTRACT ($3.46 PER HOUR), AND WE FAIL TO FIND, CONSIDERING THE POSSIBLE "MIX" OF EMPLOYEES, INTER ALIA, SUCH GROSS DIFFERENTIALS IN THE WAGES OFFERED BY THE TWO PARTIES AS WOULD JUSTIFY A CONCLUSION THAT KENTRON WAS PLACED IN SUCH A COMPETITIVE DISADVANTAGE AS TO RENDER THE CONTRACT VOID, OR THAT DYNALECTRON'S OFFER WAS NONRESPONSIVE TO THE TERMS OF THE RFP. THUS, AS STATED IN 50 COMP. GEN. 592, FEBRUARY 26, 1971:

WHILE IT IS EVIDENT THAT YOUR COMMITMENT TO WAGE RATES WHICH WERE HIGHER THAN THOSE APPARENTLY AVAILABLE TO BOEING AND PAN AM PLACED YOU IN A POOR COMPETITIVE POSITION IF YOU PROPOSED ONLY ON THE BASIS OF PAYING SUCH RATES, THAT FACT ALONE PRESENTS NO ADEQUATE BASIS FOR REQUIRING ALL OTHER BIDDERS TO ADOPT YOUR WAGE RATES.

FINALLY, WITH RESPECT TO THE FIRST ISSUE RAISED IN YOUR PROTEST, WE BELIEVE IT IS PERTINENT TO NOTE THAT THE SPECIFIED WAGE RATES ARE BUT MINIMUM RATES. THE ISSUANCE OF A WAGE RATE DETERMINATION ONLY CONSTITUTES A FINDING THAT THE RATES SPECIFIED THEREIN ARE THE RATES PREVAILING IN THE LOCALITY, AND THE INCLUSION THEREOF IN AN IFB OR RFP DOES NOT CONSTITUTE A REPRESENTATION BY THE GOVERNMENT THAT LABOR MAY BE OBTAINED BY THE CONTRACTOR AT SUCH RATES. UNITED STATES V BINGHAMTON CONSTRUCTION CO., 347 U.S. 171 (1954); 48 COMP. GEN. 22 (1968). EACH OFFEROR, THEREFORE, HAD THE BURDEN OF ASCERTAINING FOR ITSELF ITS PROBABLE LABOR COST. 167250, NOVEMBER 13, 1969; 50 COMP. GEN. 648; 655, MARCH 24, 1971. THIS REGARD, OUR OFFICE HAS NOTED THAT THE AWARD OF COST-REIMBURSEMENT CONTRACTS REQUIRE PROCUREMENT PERSONNEL TO EXERCISE INFORMED JUDGMENTS AS TO WHETHER SUBMITTED PROPOSALS ARE REALISTIC CONCERNING PROPOSED COST AND TECHNICAL APPROACH INVOLVED. WE BELIEVE THAT SUCH JUDGMENT MUST PROPERLY BE LEFT TO THE ADMINISTRATIVE DISCRETION OF THE CONTRACTING AGENCIES INVOLVED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS "REALISM" OF COST AND TECHNICAL APPROACHES, AND MUST BEAR THE MAJOR CRITICISM FOR ANY DIFFICULTY OR EXPENSES EXPERIENCED BY REASON OF A DEFECTIVE COST ANALYSIS. 50 COMP. GEN. 390, DECEMBER 16, 1970. HERE, THE CONTRACTOR HAS AGREED TO MAXIMUM LABOR RATES, AND ANY LOSS OCCASIONED BY A COST OVERRUN WILL BE BORNE BY THE CONTRACTOR, NOT THE GOVERNMENT.

CONTRARY TO THE ASSERTIONS IN SUPPORT OF THE SECOND BASIS OF YOUR PROTEST, DYNALECTRON DID IN FACT INCLUDE WITHIN ITS COST PROPOSAL PROVISIONS FOR YEAR-TO-YEAR ESCALATION IN COSTS OF DIRECT LABOR. THESE PROVISIONS REFLECT AN EXPECTED ANNUAL INCREASE OF APPROXIMATELY 1.8 PERCENT, AS COMPARED WITH KENTRON'S STATED EXPERIENCE OF AN AVERAGE ANNUAL INCREASE OF 1.4 PERCENT OVER THE PRIOR YEARS OF THE OPERATION OF THE RANGE. THER HAS BEEN NO SHOWING OF ANY UNREASONABLENESS IN THE PROPOSAL SUBMITTED BY DYNALECTRON, OR THAT THE CONTRACTING OFFICER ACTED CAPRICIOUSLY OR ARBITRARILY IN ACCEPTING DYNALECTRON'S PROPOSAL AS BEING IN THE BEST INTEREST OF THE GOVERNMENT.

IN SUPPORT OF YOUR CONTENTION THAT PERFORMANCE BY DYNALECTRON, PURSUANT TO THE TERMS OF ITS CONTRACT, WOULD ENCOURAGE AND MAKE INEVITABLE A VIOLATION OF THE NATIONAL LABOR RELATIONS ACT, BOTH YOUR OFFICE AND THE IBEW HAVE FURNISHED OUR OFFICE A COPY OF AN UNFAIR LABOR PRACTICE CHARGE FILED WITH THE NATIONAL LABOR RELATIONS BOARD BY IBEW, CHARGING DYNALECTRON, AMONG OTHER THINGS WITH (1) REFUSING TO MEET WITH THE UNION TO DISCUSS CONDITIONS OF EMPLOYMENT, (2) DEALING WITH EMPLOYEES ON AN INDIVIDUAL BASIS RATHER THAN THROUGH THEIR CERTIFIED UNION REPRESENTATIVES AND (3) GIVING NOTICE THAT IT INTENDS TO ALTER UNILATERALLY THE EXISTING TERMS AND CONDITIONS OF EMPLOYMENT. UNDER THE NATIONAL LABOR RELATIONS ACT, 29 U.S.C. 151 ET SEQ., THE NLRB HAS AUTHORITY TO HEAR AND ISSUE ORDERS RELATING TO CHARGES OF UNFAIR LABOR PRACTICES UNDER THE ACT. WOULD APPEAR THEREFORE THAT THE PROCEEDINGS TO WHICH YOU REFER, CHARGING DYNALECTRON WITH UNFAIR LABOR PRACTICES AND VIOLATION OF THE ACT, MAY WELL RESOLVE THE BASIC COMPLAINTS OF IBEW. HOWEVER, IN THE ABSENCE OF SUCH A DETERMINATION UPHOLDING THE POSITION OF IBEW, WE SEE NO VALID BASIS ON WHICH TO DISAGREE WITH NAVY'S POSITION THAT IT IS A MATTER OF CONJECTURE WHETHER LABOR STRIFE WILL OCCUR WHILE THE INCUMBENT IS PERFORMING OR WHEN A SUCCESSOR TAKES OVER.

WE MUST AGREE WITH THE PROCURING ACTIVITY'S ACTION IN REFUSING TO INCORPORATE, AS A MINIMUM REQUIREMENT FOR NEGOTIATION, THE AVERAGE RATE UNDER THE PREVIOUS CONTRACT HELD BY KENTRON, SINCE REQUIREMENTS CONCERNING WAGES AND OTHER EMPLOYMENT PRACTICES MAY BE INCLUDED IN GOVERNMENT CONTRACTS ONLY AS SPECIFICALLY AUTHORIZED BY STATUTE, AND THE STATUTE APPLICABLE TO THIS CONTRACT PROVIDES THAT THE MINIMUM WAGE REQUIREMENTS SHALL BE THOSE DETERMINED BY THE SECRETARY OF LABOR. THE ABSENCE OF SUCH A WAGE DETERMINATION WOULD IN NO WAY CHANGE THIS WELL ACCEPTED PRINCIPLE OF GOVERNMENT CONTRACT LAW. THE SERVICE CONTRACT ACT IS REMEDIAL IN PURPOSE AND WAS ENACTED FOR THE BENEFIT OF EMPLOYEES ONLY, NOT FOR THE GOVERNMENT OR PROSPECTIVE CONTRACTORS. 48 COMP. GEN. 22 (1968).

UNDER THE CIRCUMSTANCES, WE ARE UNABLE TO CONCLUDE THAT NAVY'S SELECTION OF DYNALECTRON FOR NEGOTIATION OF A CONTRACT FOR THIS PROCUREMENT, AS SET OUT ABOVE, WAS OTHER THAN A VALID EXERCISE OF THE DISCRETION GRANTED TO NAVY, AS THE CONTRACTING AGENCY, TO MAKE THE AWARD WHICH WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT AS CONTEMPLATED BY THE PROVISIONS OF ASPR 3 -805.2. ACCORDINGLY, YOUR PROTEST MUST BE DENIED.