B-173953, DEC 3, 1971, 51 COMP GEN 344

B-173953: Dec 3, 1971

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PROPERLY WAS CONSIDERED ON THE BASIS OF COMPTROLLER GENERAL DECISIONS AND AGENCY REGULATIONS. THE DETERMINATION TO EXCLUDE THE CERTIFICATE WAS NOT ERRONEOUS BECAUSE THE CONTRACTING OFFICER FAILED TO EXERCISE HIS INDEPENDENT JUDGMENT. OR DISCRETION SINCE THE SOLICITATION AND REGULATIONS REQUIRING THE CERTIFICATE TO BE SUBMITTED WITH AN OFFER WERE MANDATORY. RELIANCE ON THE COMPTROLLER'S DECISIONS WAS APPROPRIATE IN VIEW OF 31 U.S.C. 1. CONTRACTS - GOVERNMENT PROPERTY - DISPOSAL - POLICY TO MINIMIZE OWNERSHIP THE AWARD OF THE NON-SET-ASIDE PORTION OF A LABOR SURPLUS AREA PROCUREMENT FOR PROJECTILES TO A CONTRACTOR OPERATING A GOVERNMENT OWNED FACILITY (GOCO) RATHER THAN TO A CONTRACTOR OWNING HIS FACILITY AND UTILIZING GOVERNMENT-OWNED PRODUCTION EQUIPMENT IS NOT VIOLATIVE OF THE POLICY TO MINIMIZE GOVERNMENT OWNERSHIP OF INDUSTRIAL FACILITIES STATED IN DEPARTMENT OF DEFENSE DIRECTIVE 4275.5.

B-173953, DEC 3, 1971, 51 COMP GEN 344

CONTRACTS - AWARDS - LABOR SURPLUS AREAS - CERTIFICATE OF ELIGIBILITY - VALIDITY DETERMINATION THE UNTIMELY SUBMISSION OF A CERTIFICATE OF ELIGIBILITY - SUBSEQUENTLY RECALLED - UNDER A LABOR SURPLUS AREA SET-ASIDE BY A SMALL BUSINESS CONCERN, WHO IN CONTRAST TO GOVERNMENT-OWNED FACILITIES OPERATED UNDER CONTRACT, OWNS ITS FACILITIES AND UTILIZES GOVERNMENT OWNED PRODUCTION EQUIPMENT, PROPERLY WAS CONSIDERED ON THE BASIS OF COMPTROLLER GENERAL DECISIONS AND AGENCY REGULATIONS. THE DETERMINATION TO EXCLUDE THE CERTIFICATE WAS NOT ERRONEOUS BECAUSE THE CONTRACTING OFFICER FAILED TO EXERCISE HIS INDEPENDENT JUDGMENT, OR DISCRETION SINCE THE SOLICITATION AND REGULATIONS REQUIRING THE CERTIFICATE TO BE SUBMITTED WITH AN OFFER WERE MANDATORY, AND RELIANCE ON THE COMPTROLLER'S DECISIONS WAS APPROPRIATE IN VIEW OF 31 U.S.C. 1, ET SEQ., AUTHORIZING THE DISALLOWANCE OF CREDIT IN THE ACCOUNTS OF FISCAL OFFICERS FOR PAYMENTS UNDER AN ILLEGAL CONTRACT. CONTRACTS - GOVERNMENT PROPERTY - DISPOSAL - POLICY TO MINIMIZE OWNERSHIP THE AWARD OF THE NON-SET-ASIDE PORTION OF A LABOR SURPLUS AREA PROCUREMENT FOR PROJECTILES TO A CONTRACTOR OPERATING A GOVERNMENT OWNED FACILITY (GOCO) RATHER THAN TO A CONTRACTOR OWNING HIS FACILITY AND UTILIZING GOVERNMENT-OWNED PRODUCTION EQUIPMENT IS NOT VIOLATIVE OF THE POLICY TO MINIMIZE GOVERNMENT OWNERSHIP OF INDUSTRIAL FACILITIES STATED IN DEPARTMENT OF DEFENSE DIRECTIVE 4275.5, NOVEMBER 14, 1966, UNDER THE HEADING "INDUSTRIAL FACILITY EXPANSION POLICY," FOR ALTHOUGH THE AWARD WILL KEEP THE GOVERNMENT FACILITY IN EXISTENCE, NO ACQUISITION, EXPANSION, CONSTRUCTION, OR USE OF PROPERTY TO INCREASE PRODUCTION IS ENTAILED. FURTHERMORE, THE SOLICITATION PROVIDED FOR THE PARTICIPATION OF GOCO CONTRACTORS, AND THE APPROVAL OF ACCOUNTING PROCEDURES, REMOVES THE POSSIBILITY OF A PORTION OF THE GOCO CONTRACTOR'S COST BEING ALLOCATED TO ITS COST-REIMBURSABLE CONTRACT WITH THE GOVERNMENT. WAGE AND PRICE STABILIZATION - CONTRACT MATTERS - PRICES - ESCALATION CLAUSE COVERAGE THE OMISSION OF A PRICE ESCALATION CLAUSE TO REFLECT THE IMPACT OF EXECUTIVE ORDER 11615, AUGUST 15, 1971, WHICH PROVIDES FOR THE STABILIZATION OF PRICES, RENTS, WAGES, AND SALARIES, FROM A REQUEST FOR PROPOSALS TO FURNISH PROJECTILES THAT WAS ISSUED TO BOTH GOVERNMENT OWNED, CONTRACTOR OPERATED FACILITIES AND PRIVATELY OWNED FACILITIES UTILIZING GOVERNMENT-OWNED PRODUCTION EQUIPMENT DOES NOT MAKE THE SOLICITATION DEFECTIVE. THE OPPORTUNITY DURING NEGOTIATIONS TO PROPOSE A CONTRACT WITH AN ESCALATION PROVISION HAVING BEEN DECLINED BY THE PROTESTANT BECAUSE THE MAXIMUM AMOUNT OF THE ESCALATION WOULD HAVE TO BE ADDED TO THE PRICE, IT IS NOT APPROPRIATE AFTER SUBMISSION OF A PROPOSAL TO CONTEND AN AWARD CANNOT PROPERLY BE MADE ON THE BASIS OF PROPOSALS WHICH, AS WAS THE CASE WITH THE PROTESTANT'S PROPOSAL, DID NOT INCLUDE AN ESCALATION CLAUSE.

TO STOREY, BRYAN AND SILVERSTEIN, DECEMBER 3, 1971:

REFERENCE IS MADE TO TWO TELEGRAMS DATED SEPTEMBER 10, 1971, FROM GOLDEN INDUSTRIES, INC. (GOLDEN), AND TO YOUR SUBSEQUENT CORRESPONDENCE ON BEHALF OF GOLDEN PROTESTING AGAINST THE REJECTION OF A CERTIFICATE OF ELIGIBILITY SUBMITTED BY GOLDEN UNDER RFP DAAA 09-71-R-0143 (RFP 0143), ISSUED BY THE ARMY AMMUNITION PROCUREMENT AND SUPPLY AGENCY, JOLIET, ILLINOIS.

THE INSTANT PROTEST, AND THOSE OF TWO OTHER FIRMS, ARISE FROM THE PROCUREMENT BY THE AMMUNITION PROCUREMENT AND SUPPLY AGENCY (APSA) OF THE ARMY'S REQUIREMENTS FOR 155MM PROJECTILES. IT APPEARS FROM THE RECORD THAT THERE ARE ONLY FIVE FACILITIES EQUIPPED TO MANUFACTURE THIS ITEM:

SCRANTON ARMY AMMUNITION PLANT (CHAMBERLAIN MANUFACTURING CORPORATION)

LOUISIANA ARMY AMMUNITION PLANT (SPERRY RAND CORPORATION)

TWIN CITIES ARMY AMMUNITION PLANT (DONOVAN CONSTRUCTION COMPANY)

CHAMBERLAIN MANUFACTURING CORPORATION, NEW BEDFORD, MASSACHUSETTS

GOLDEN INDUSTRIES, INC., SYLACAUGA, ALABAMA.

THE SCRANTON, LOUISIANA AND TWIN CITIES PLANTS ARE GOVERNMENT-OWNED FACILITIES OPERATED IN WHOLE OR IN PART BY CHAMBERLAIN, SPERRY RAND AND DONOVAN, RESPECTIVELY. IN CONTRAST TO THESE GOVERNMENT-OWNED, CONTRACTOR- OPERATED (GOCO) FACILITIES, CHAMBERLAIN (NEW BEDFORD) AND GOLDEN ARE PRIVATELY-OWNED FACILITIES WHICH UTILIZE GOVERNMENT-OWNED PRODUCTION EQUIPMENT. GOLDEN IS THE SOLE SMALL BUSINESS CONCERN AMONG THE FIVE OFFERORS. ALL FIVE FACILITIES WERE ACTIVE IN THE PRODUCTION OF 155MM PROJECTILES DURING FISCAL YEAR 1971, IN WHICH THEY WERE OPERATING UNDER FIXED-PRICE CONTRACTS FOR SUPPLIES. ADDITIONALLY, EACH PLANT HAD A COST REIMBURSABLE CONTRACT TO COVER THE MAINTENANCE OF EQUIPMENT AND THE ASSIGNMENT OF THE EQUIPMENT TO ITS CONTRACTS.

THE REFERENCED SOLICITATION WAS ISSUED ON JULY 15, 1971, FOR A SUPPLY OF THESE PROJECTILES. OFFERORS WERE PERMITTED TO SUBMIT PRICES ON VARIOUS QUANTITY RANGES OF PROJECTILES, ONE OF WHICH WAS "RANGE B 980,001 TO 1,120,000." IN REGARD TO THIS QUANTITY RANGE, THE SOLICITATION PROVIDED:

IN ADDITION TO THE QUANTITY OF RANGE B SHOWN ABOVE, A LIKE QUANTITY HAS BEEN SET ASIDE FOR AWARD TO A LABOR SURPLUS AREA CONCERN.

SECTION C OF RFP-0143 CONTAINED THE CLAUSE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE (1970 JUN)" (ASPR 1-804.2(B)(1)), WHICH ESTABLISHED THE PROCEDURES FOR THE NEGOTIATION OF THE SET-ASIDE PORTION OF THE PROCUREMENT. PRIORITY FOR SUCH NEGOTIATIONS DESCENDED THROUGH THE FOLLOWING 7 GROUPS:

GROUP 1. CERTIFIED-ELIGIBLE CONCERNS WITH A FIRST PREFERENCE WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 2. OTHER CERTIFIED-ELIGIBLE CONCERNS WITH A FIRST PREFERENCE.

GROUP 3. CERTIFIED-ELIGIBLE CONCERNS WITH A SECOND PREFERENCE WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 4. OTHER CERTIFIED-ELIGIBLE CONCERNS WITH A SECOND PREFERENCE.

GROUP 5. PERSISTENT OR SUBSTANTIAL LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 6. OTHER PERSISTENT OR SUBSTANTIAL LABOR SURPLUS AREA CONCERNS.

GROUP 7. SMALL BUSINESS CONCERNS WHICH ARE NOT SURPLUS AREA CONCERNS.

"CERTIFIED-ELIGIBLE CONCERNS WITH A FIRST PREFERENCE," BY DEFINITION UNDER PARAGRAPH (B)(2)(I) OF THE ABOVE-CITED CLAUSE, MUST HAVE BEEN "CERTIFIED BY THE SECRETARY OF LABOR IN ACCORDANCE WITH THE 29 CFR 8.7(B) AND 8.7(C), WITH RESPECT TO THE EMPLOYMENT OF DISADVANTAGED PERSONS RESIDING WITHIN SUCH SECTIONS OR AREAS" OF UNEMPLOYMENT OR LABOR SURPLUS. PARAGRAPH (D) OF THE CLAUSE ADVISED OFFERORS:

WHERE ELIGIBILITY FOR PREFERENCE IS BASED ON THE STATUS OF THE OFFEROR AS A "CERTIFIED-ELIGIBLE CONCERN," THE OFFEROR SHALL FURNISH WITH HIS OFFER EVIDENCE OF ITS CERTIFICATION OR ITS FIRST TIER SUBCONTRACTORS' CERTIFICATION BY THE SECRETARY OF LABOR.

THE SOLICITATION, AS AMENDED, ESTABLISHED AUGUST 30, 1971, AS THE CLOSING DATE FOR RECEIPT OF PROPOSALS. GOLDEN TIMELY SUBMITTED A PROPOSAL IN WHICH IT CERTIFIED ITSELF TO BE A SMALL BUSINESS CONCERN, AND INDICATED THAT THE CONTRACT WOULD BE PERFORMED IN, AND THE ITEMS WOULD BE FURNISHED FROM, SYLACAUGA, TALLADEGA COUNTY, ALABAMA. THE COVER LETTER ACCOMPANYING THE PROPOSAL STATED:

WE WISH TO NOTE THAT OUR COMPANY IS ELIGIBLE FOR THE LABOR SURPLUS SET- ASIDE AS WELL AS BEING A SMALL BUSINESS.

GOLDEN IDENTIFIED THREE OTHER GEOGRAPHICAL AREAS IN THE BLANKS PROVIDED BY PARAGRAPH (C) OF THE "NOTICE OF LABOR SURPLUS AREA SET ASIDE" CLAUSE, THEREBY INDICATING THE BASIS FOR ITS DESIRE TO BE CONSIDERED FOR AWARD AS A LABOR SURPLUS AREA CONCERN ON THE SET-ASIDE PORTION OF THE PROCUREMENT. HOWEVER, APPARENTLY THROUGH INADVERTENCE, GOLDEN DID NOT FURNISH A CERTIFICATE OF ELIGIBILITY WITH ITS INITIAL PROPOSAL NOR OTHERWISE INDICATE THAT IT WAS A "CERTIFIED-ELIGIBLE" CONCERN BASED ON PERFORMANCE OF ANY WORK IN TALLADEGA COUNTY.

AMENDMENTS 0011 AND 0012 TO THE SOLICITATION OPENED NEGOTIATIONS ON SEPTEMBER 1 AND CLOSED NEGOTIATIONS ON SEPTEMBER 10, 1971. ON SEPTEMBER 7, GOLDEN SUBMITTED TO THE PROCURING ACTIVITY FOR INCLUSION WITH ITS PROPOSAL A CERTIFICATE OF ELIGIBILITY. THE CERTIFICATE, DATED AUGUST 27, 1971, CERTIFIED GOLDEN FOR THE FIRST PREFERENCE GROUP ON THE BASIS OF AN AGREEMENT TO HIRE DISADVANTAGED INDIVIDUALS RESIDING WITHIN "TALLADEGA COUNTY, ALABAMA." BY LETTER OF SEPTEMBER 9, 1971, THE PROCURING CONTRACTING OFFICER RETURNED THE CERTIFICATE TO GOLDEN WITH THE ADVICE THAT THE FAILURE TO SUBMIT THE CERTIFICATE PRIOR TO THE CLOSING DATE FOR RECEIPT OF PROPOSALS PRECLUDED ITS CONSIDERATION. IN SUPPORT OF HIS CONCLUSION, THE PROCURING CONTRACTING OFFICER REFERRED TO PARAGRAPH (D) OF THE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE" CLAUSE, QUOTED ABOVE, AND TO OUR DECISIONS, 47 COMP. GEN. 543 (1968) AND B-171815, MAY 28, 1971. ALSO OBSERVE THAT PARAGRAPH 1-804.2 OF THE ARMY MATERIEL COMMAND PROCUREMENT INSTRUCTION PROVIDES:

A COPY OF THE DEPARTMENT OF LABOR'S CERTIFICATION MUST BE SUBMITTED WITH THE OFFER, IN ORDER TO QUALIFY FOR LABOR SURPLUS AREA PREFERENCE. THIS REQUIREMENT IS ONE OF RESPONSIVENESS THAT CANNOT BE SUPPLIED OR CORRECTED AFTER TIME FOR BID OPENING OR DATE FIXED FOR RECEIPT OF PROPOSALS.

YOU THEN PROTESTED TO OUR OFFICE AGAINST THE CONTRACTING OFFICER'S ACTION IN REJECTING THE CERTIFICATE OF ELIGIBILITY.

BY LETTERS OF OCTOBER 27 AND NOVEMBER 12, 1971, CHAMBERLAIN MANUFACTURING CORPORATION (CHAMBERLAIN), AN OFFEROR WHO HAS PROTESTED TO OUR OFFICE THAT IT WOULD BE IMPROPER TO ACCEPT GOLDEN'S CERTIFICATE OF ELIGIBILITY, ARGUED THAT OUR OFFICE HAS CONSISTENTLY HELD THAT "SUBMISSION OF THE CERTIFICATE ON OR BEFORE THE DUE DATE OF A BID SUBMISSION RUNS TO THE RESPONSIVENESS OF THE SUBMISSION AND A FAILURE TO SO SUBMIT DISQUALIFIES THE BIDDER." ADDITIONALLY, CHAMBERLAIN OBSERVED THAT TALLADEGA COUNTY, ALABAMA, WAS FIRST DESIGNATED AN AREA OF SUBSTANTIAL UNEMPLOYMENT IN THE AUGUST 1971 ISSUE OF "AREA TRENDS IN EMPLOYMENT AND UNEMPLOYMENT," PUBLISHED BY THE U.S. DEPARTMENT OF LABOR. IT IS STATED ON PAGE 1 OF THAT PUBLICATION:

FOR PURPOSES OF FEDERAL PROCUREMENT PREFERENCE, ALL CHANGES IN THE SUBSTANTIAL OR PERSISTENT CLASSIFICATIONS ARE EFFECTIVE ON SEPTEMBER 1, 1971.

CHAMBERLAIN CONTENDS THAT FOR THIS REASON, "THE CERTIFICATE OF ELIGIBILITY WAS ILLEGAL AND UNENFORCEABLE AND OF NO CONSEQUENCE ON THE DATE OF ITS ISSUANCE WITH RESPECT TO THIS PROCUREMENT. *** ." ALTHOUGH AWARD OF THE NON-SET-ASIDE PORTION OF THE PROCUREMENT HAS BEEN MADE TO AN OFFEROR OTHER THAN GOLDEN, AWARD OF THE SET-ASIDE PORTION HAS BEEN WITHHELD PENDING ISSUANCE OF OUR DECISION.

YOU FIRST CONTEND THAT THE REJECTION OR ACCEPTANCE OF YOUR CERTIFICATE OF ELIGIBILITY WAS A MATTER FOR THE INDEPENDENT JUDGMENT OF THE CONTRACTING OFFICER. YOU STATE THAT IN REJECTING THE CERTIFICATE, THE CONTRACTING OFFICER ABDICATED TO THIS OFFICE THE RESPONSIBILITY OF EXERCISING HIS DISCRETION, THEREBY MAKING HIS DECISION A NULLITY. YOU CITE UNITED STATES V MASON & HANGER CO., 260 U.S. 323 (1922); ARNOLD V UNITED STATES, 404 F.2D 953, 186 CT. CL. 117; SCHLESINGER V UNITED STATES, 182 CT. CL. 571 (1968).

UNITED STATES V MASON & HANGER, SUPRA, ACCORDED FINALITY TO THE CONTRACTING OFFICER'S APPROVAL OF AN ITEM OF COST INCURRED BY A CONTRACTOR WHOSE COST-REIMBURSEMENT CONTRACT PROVIDED THAT SUCH DECISION "SHALL GOVERN," 260 U.S. AT 325, AND THAT "THE STATEMENT SO MADE AND ALL PAYMENTS MADE THEREON SHALL BE FINAL AND BINDING UPON BOTH PARTIES *** ." ID. WE MUST AGREE WITH THE ADMINISTRATIVE POSITION THAT THE ABOVE CASE, WHICH IS CONCERNED WITH THE FINALITY OF A DECISION UNDER A "DISPUTES-TYPE" CONTRACTUAL PROVISION, IS DISTINGUISHABLE FROM THE INSTANT CASE INVOLVING THE PROPRIETY OF ENTERING INTO A PROPOSED CONTRACT.

IN ARNOLD V UNITED STATES, SUPRA, THE COURT HELD THAT SALARY PAYMENTS COULD NOT VALIDLY BE WITHHELD UNDER A STATUTE REQUIRING THE SECRETARY OF THE AIR FORCE OR HIS DESIGNEE TO ORDER WITHHOLDING, WHERE NEITHER THE SECRETARY NOR HIS DESIGNEE MADE THE REQUIRED DETERMINATION AND WHERE THE ORDER WAS ISSUED WITHOUT ANY EXERCISE OF DISCRETION BY THE AIR FORCE. OBSERVING THAT THE ORDER WAS ISSUED SOLELY AS A MECHANICAL RESPONSE TO A CERTIFICATE OF INDEBTEDNESS FROM THE COMPTROLLER GENERAL, THE COURT EMPHASIZED THAT THE STATUTE REQUIRED A "DETERMINATION" OF INDEBTEDNESS WHICH "MAY" BE COLLECTED BY WITHHOLDING, LANGUAGE WHICH IMPLIED THE USE OF INDEPENDENT JUDGMENT AND THE POWER OF CHOICE, 404 F.2D 957-958.

IT WAS HELD IN SCHLESINGER V UNITED STATES, SUPRA, THAT A CLAUSE PROVIDING THE GOVERNMENT "MAY" (NOT "SHALL" OR "MUST") TERMINATE A CONTRACT FOR DEFAULT VESTED IN THE GOVERNMENT CERTAIN ADMINISTRATIVE DISCRETION WHETHER TO TERMINATE, AND A TERMINATION EFFECTED WITHOUT CONSIDERATION OF THE CONTRACTOR'S CIRCUMSTANCES OR THE AVAILABILITY OF A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT CONSTITUTED AN IMPROPER ABDICATION OF THE OBLIGATION TO EXERCISE THAT DISCRETION.

THE INSTANT CASE DOES NOT INVOLVE A SITUATION WHEREIN A STATUTE (ARNOLD) OR A CONTRACTUAL PROVISION (SCHLESINGER) REQUIRES AN OFFICIAL TO MAKE A DECISION WHICH MUST BE THE RESULT OF INDEPENDENT JUDGMENT OR CHOICE. PARAGRAPH (D) OF THE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE" CLAUSE, REFERRED TO IN THE CONTRACTING OFFICER'S LETTER REJECTING THE CERTIFICATE, EXPLICITLY STATES THAT AN OFFEROR CLAIMING STATUS AS A "CERTIFIED-ELIGIBLE CONCERN *** SHALL FURNISH WITH HIS OFFER EVIDENCE OF ITS CERTIFICATION *** ." PARAGRAPH 1-804.2 OF THE ARMY MATERIEL COMMAND PROCUREMENT INSTRUCTION (AMCPI) PROVIDES THAT A COPY OF THE CERTIFICATE OF ELIGIBILITY "MUST BE SUBMITTED WITH THE OFFER *** . THIS REQUIREMENT IS ONE OF RESPONSIVENESS THAT CANNOT BE SUPPLIED OR CORRECTED AFTER *** DATE FIXED FOR RECEIPT OF PROPOSALS." IN OUR OPINION, THE TERMS OF THE SOLICITATION (AS ESTABLISHED BY THE ARMED SERVICES PROCUREMENT REGULATION) AND THE AMCPI DID NOT PRESENT THE CONTRACTING OFFICER WITH A JUDGMENTAL OR DISCRETIONARY DETERMINATION; THEY REQUIRED REJECTION OF THE CERTIFICATE.

THE CONTRACTING OFFICER ALSO REJECTED THE CERTIFICATE IN VIEW OF OUR DECISIONS, PRINCIPALLY 47 COMP. GEN. 543 (1968), WHEREIN WE CONCLUDED:

THE REQUIREMENT IN *** THE RFP RESPECTING THE SUBMISSION OF EVIDENCE OF CERTIFICATION AS A "CERTIFIED-ELIGIBLE" CONCERN IS ONE OF RESPONSIVENESS AS TO WHICH THE CRITICAL TIME IS *** THE DATE FIXED FOR RECEIPT OF PROPOSALS. ID. AT 549.

SEE ALSO B-169260, MAY 19, 1970, IN WHICH WE UPHELD THE REJECTION OF A CERTIFICATE OF ELIGIBILITY POSSESSED BY AN OFFEROR BEFORE THE CLOSING DATE FOR RECEIPT OF PROPOSALS BUT SUBMITTED THEREAFTER.

WE HAVE STATED THAT:

WHERE A BID ACCEPTANCE IS PROPOSED BUT NOT YET CONSUMMATED BY A PROCURING AGENCY, AND OUR OFFICE CONSIDERS SUCH ACCEPTANCE UNDESIRABLE, WE MAY RECOMMEND OR DIRECT SUCH ACTION AS WE BELIEVE IS REQUIRED BY THE PUBLIC POLICY EXPRESSED IN APPLICABLE STATUTORY ENACTMENTS TO PRESERVE THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. HOWEVER, THE SANCTION FOR ANY DECISION BY THIS OFFICE HOLDING THAT AN ACCEPTED BID DID NOT RESULT IN A VALID CONTRACT IS OUR AUTHORITY UNDER THE BUDGET AND ACCOUNTING ACT. 1921, 31 U.S.C. 1, ET SEQ., TO DISALLOW CREDIT ON THE ACCOUNTS OF THE GOVERNMENT'S FISCAL OFFICERS FOR ANY PAYMENTS OUT OF APPROPRIATED FUNDS MADE PURSUANT TO AN ILLEGAL CONTRACT. 44 COMP. GEN. 221, 223 (1964).

IN VIEW OF THE AUTHORITY VESTED IN THIS OFFICE, WE DEEM IT APPROPRIATE FOR A CONTRACTING OFFICER TO REFER TO OUR DECISIONS IN EVALUATING THE PROPRIETY OF A PROPOSED ACTION LEADING TO AWARD OF A CONTRACT. THE CONTRACTING OFFICER'S REJECTION OF THE CERTIFICATE WAS CONSONANT NOT ONLY WITH 47 COMP. GEN. 543 (1968), QUOTED ABOVE, BUT WITH THE TERMS OF THE SOLICITATION AND THE ARMY MATERIEL COMMAND PROCUREMENT INSTRUCTIONS.

THE CONTRACTING OFFICER'S ACTION IS FURTHER SUPPORTED BY THE FACT, BROUGHT FORTH BY THE CHAMBERLAIN PROTEST, THAT TALLADEGA COUNTY, ALABAMA, HAD NOT EFFECTIVELY BEEN DESIGNATED AN AREA OF SUBSTANTIAL UNEMPLOYMENT AS OF AUGUST 30, THE CLOSING DATE FOR RECEIPT OF PROPOSALS. IN THIS REGARD, IT IS THE POSITION OF THE ALABAMA DEPARTMENT OF INDUSTRIAL RELATIONS THAT THE CERTIFICATE OF AUGUST 27 WAS PROPERLY ISSUED, SINCE THAT DEPARTMENT WAS IN POSSESSION OF INFORMATION FROM THE DEPARTMENT OF LABOR THAT TALLADEGA COUNTY WAS TO BE DESIGNATED AN AREA OF SUBSTANTIAL UNEMPLOYMENT. HOWEVER, IN A REPORT DATED NOVEMBER 19 WE HAVE BEEN ADVISED BY THE DEPARTMENT OF LABOR THAT IT CONSIDERS THE CERTIFICATE INVALID AND HAS INSTRUCTED THE STATE AGENCY TO RECALL THE ORIGINAL CERTIFICATE. LIEU THEREOF, GOLDEN HAS BEEN ISSUED A FIRST PREFERENCE CERTIFICATE DATE SEPTEMBER 1, 1971. THEREFORE, NOT ONLY DID GOLDEN FAIL TO SUBMIT A CERTIFICATE ON THE CLOSING DATE FOR RECEIPT OF PROPOSALS, IT ALSO LACKED THE STATUS OF A "CERTIFIED-ELIGIBLE" CONCERN AT THAT TIME. UNDER THE CIRCUMSTANCES SET OUT ABOVE, WE ARE UNABLE TO CONCLUDE THAT THE REJECTION OF GOLDEN'S CERTIFICATE OF ELIGIBILITY WAS IMPROPER.

YOUR SECOND ARGUMENT CONCERNS THE PROPRIETY OF PARTICIPATION BY GOCO CONTRACTORS, PARTICULARLY SPERRY RAND CORPORATION, IN THE INSTANT PROCUREMENT. OBSERVING THAT THE ARMY'S REDUCED REQUIREMENTS WILL RESULT IN AWARDS TO ONLY TWO OF THE OFFERORS, YOU CONTEND THAT THE AWARD OF THE NON-SET-ASIDE PORTION TO SPERRY RAND IS VIOLATIVE OF THE POLICY TO MINIMIZE GOVERNMENT OWNERSHIP OF INDUSTRIAL FACILITIES, EXPRESSED IN PARAGRAPHS IV.A. AND IV.C.1.A. OF DEPARTMENT OF DEFENSE DIRECTIVE 4275 5, NOVEMBER 14, 1966.

THE PORTIONS OF THE DIRECTIVE WHICH YOU HAVE QUOTED APPEAR UNDER THE HEADING "INDUSTRIAL FACILITY EXPANSION POLICY." THE SCOPE OF THE EXPANSION POLICY, AS STATED IN PARAGRAPH IV.B. OF THE DIRECTIVE:

*** COVERS ACQUISITION, EXPANSION, CONSTRUCTION AND USE OF BOTH SEVERABLE AND NONSEVERABLE PROPERTY TO INCREASE PRODUCTION, MAINTENANCE OR RESEARCH AND DEVELOPMENT CAPABILITY. IT INCLUDES REPLACEMENT AND MODERNIZATION OF BUILDINGS, STRUCTURES AND OTHER NONSEVERABLES.

WHILE AN AWARD TO SPERRY RAND MAY KEEP IN EXISTENCE A GOCO FACILITY, THERE IS NO EVIDENCE OF RECORD THAT IT ENTAILS THE ACQUISITION, EXPANSION, CONSTRUCTION OR USE OF PROPERTY TO INCREASE PRODUCTION. IT IS THEREFORE OUR OPINION THAT THE AWARD DOES NOT FALL WITHIN THE PROVISIONS YOU HAVE QUOTED.

ADDITIONALLY, THE SOLICITATION IS REPLETE WITH REFERENCES TO PARTICIPATION BY GOCO CONTRACTORS IN THIS PROCUREMENT. ON PAGE 27 OF RFP- 0143, OFFERORS WERE INFORMED:

OPERATING CONTRACTORS OF GOCO FACILITIES MAY PARTICIPATE IN THIS PROCUREMENT AND SUCH PARTICIPATION SHALL BE BASED ON USE OF THE GOCO FACILITIES.

AMENDMENT 0002 TO THE SOLICITATION STATED: "PARTICIPATION BY GOCO FACILITIES IS EXPECTED IN THIS SOLICITATION." THE AMENDMENT THEN SET FORTH EVALUATION FACTORS FOR ABNORMAL MAINTENANCE AND ESSENTIAL SERVICES FOR THE TWIN CITIES AND LOUISIANA ARMY AMMUNITION PLANTS. AMENDMENT 0004 REVISED THESE EVALUATION FACTORS AND SET FORTH SIMILAR FACTORS FOR THE SCRANTON ARMY AMMUNITION PLANT. THE EVALUATION FACTORS FOR THE SCRANTON PLANT WERE THEN REVISED IN AMENDMENT 0007.

THESE REPETITIVE REFERENCES TO GOCO FACILITIES, COMBINED WITH THE EXTREMELY LIMITED AND WELL-KNOWN FIELD OF AVAILABLE PRODUCERS, PROVIDED GOLDEN WITH NOTICE OF THE PROBABLE NATURE OF ITS COMPETITORS PRIOR TO SUBMISSION OF ITS PROPOSAL. ANY OBJECTION WHICH GOLDEN MAY HAVE HAD TO PARTICIPATION BY GOCO FACILITIES SHOULD HAVE BEEN MADE AT THAT TIME, RATHER THAN AFTER PROPOSALS HAD BEEN SUBMITTED AND AWARD OF THE NON-SET ASIDE HAD BEEN MADE TO SPERRY RAND. CF. 50 COMP. GEN. 163, SEPTEMBER 3, 1970.

YOU FURTHER SUGGEST THAT SPERRY RAND MAY ENJOY AN UNFAIR COMPETITIVE ADVANTAGE THROUGH THE IMPROPER ALLOCATION OF A PORTION OF ITS FIXED PRICE CONTRACT COSTS TO ITS COST-REIMBURSABLE CONTRACTS AT LOUISIANA ARMY AMMUNITION PLANT. WE ARE ADVISED BY THE DEPARTMENT OF THE ARMY THAT SPERRY RAND HAS SUBMITTED TO THE GOVERNMENT ACCOUNTING PROCEDURES, RATES AND COSTING TECHNIQUES FOLLOWED IN ALLOCATING COST BETWEEN COST REIMBURSABLE AND FIXED-PRICE CONTRACTS. THESE PROCEDURES WERE SUBMITTED TO THE DEFENSE CONTRACT AUDIT AGENCY (DCAA) FOR ITS REVIEW AND APPROVAL. DCAA RECOMMENDED APPROVAL OF THESE PROCEDURES SUBJECT TO CERTAIN RESERVATIONS, WHICH WERE ACCEPTED BY SPERRY RAND IN A SUBSEQUENT AGREEMENT WITH THE GOVERNMENT REGARDING THE PROPOSED METHOD OF ALLOCATION OF COSTS.

WE ARE FURTHER ADVISED BY THE DEPARTMENT OF THE ARMY:

THE AGREEMENT PROVIDES FOR DCAA MONITORSHIP OF THE ALLOCATIONS AND ONLY THOSE ALLOCATIONS WHICH ARE IN ACCORDANCE WITH SOUND ACCOUNTING PRINCIPLES AND IN ACCORDANCE WITH THE APPROVED PROCEDURES WILL BE RECOGNIZED AS LEGITIMATE CHARGES AGAINST THE COST TYPE CONTRACT. ANY COSTS DISALLOWED AGAINST THE COST TYPE CONTRACT WILL NOT BE PAID BY THE GOVERNMENT. THE FIXED PRICE CONTRACT DOES NOT INCLUDE ANY PROVISION FOR PRICE ADJUSTMENT DUE TO DISALLOWANCES AGAINST THE COST TYPE CONTRACT. THEREFORE, ANY SUCH DISALLOWANCES WILL BE THE RESPONSIBILITY OF THE CONTRACTOR.

IN VIEW OF THE FACT THAT SPERRY RAND HAS AGREED TO COST ALLOCATION PROCEDURES REVIEWED AND APPROVED BY DCAA, WE ARE UNABLE TO CONCLUDE THAT SPERRY RAND'S OFFER UNDER THE INSTANT SOLICITATION REFLECTS IMPROPER COST ALLOCATIONS.

EXECUTIVE ORDER 11615, AUGUST 15, 1971, PROVIDED FOR THE STABILIZATION OF PRICES, RENTS, WAGES AND SALARIES. YOUR THIRD CONTENTION IS THAT THE SOLICITATION IS DEFECTIVE IN THAT IT DID NOT REFLECT THE IMPACT OF THE EXECUTIVE ORDER BY AN AMENDMENT PROVIDING A PRICE ESCALATION PROVISION.

SECTION C, PAGE 11 OF RFP-0143 ADVISED OFFERORS:

A FIRM-FIXED PRICE TYPE CONTRACT IS DESIRED AND WILL BE AWARDED IF, WHEN EVALUATED, SUCH IS DETERMINED TO BE IN THE BEST INTEREST OF THE GOVERNMENT.

IN THIS CONNECTION, IT IS ADMINISTRATIVELY REPORTED:

BASED ON THE ABOVE LANGUAGE AN OFFEROR COULD HAVE PROPOSED A CONTRACT WITH ESCALATION ON MATERIAL AND/OR LABOR AND HIS PROPOSAL WOULD HAVE BEEN CONSIDERED. DURING THE NEGOTIATIONS *** THE GOLDEN INDUSTRIES PERSONNEL DID DISCUSS THIS MATTER WITH THE GOVERNMENT NEGOTIATION TEAM. THEY WERE ADVISED THE GOVERNMENT DID NOT DESIRE A CONTRACT CONTAINING AN ESCALATION CLAUSE, HOWEVER, THEY COULD SUBMIT SUCH A PROPOSAL AND IT WOULD BE GIVEN CONSIDERATION. GOLDEN WAS CAUTIONED, HOWEVER, THAT THE MAXIMUM AMOUNT OF ESCALATION PROPOSED WOULD BE ADDED AS AN EVALUATION FACTOR ON TO THEIR PRICE. AFTER MUCH DISCUSSION THE GOLDEN INDUSTRIES REPRESENTATIVES INDICATED THEY WOULD NOT SEEK ESCALATION.

IT THEREFORE APPEARS THAT GOLDEN CONSIDERED AND DECLINED THE OPPORTUNITY TO INCLUDE AN ESCALATION CLAUSE IN ITS PROPOSAL.

FINALLY, WE BELIEVE THE APPROPRIATE TIME FOR GOLDEN TO HAVE PROTESTED THIS ALLEGED DEFICIENCY IN THE SOLICITATION WAS BEFORE THE SUBMISSION OF ITS PROPOSAL. CERTAINLY ITS FAILURE TO DO SO NOW PRECLUDES IT FROM CONTENDING THAT AN AWARD CANNOT PROPERLY BE MADE ON THE BASIS OF PROPOSALS WHICH, AS WAS THE CASE WITH ITS PROPOSAL, DID NOT INCLUDE AN ESCALATION CLAUSE.

IN VIEW OF THE FOREGOING, YOUR PROTEST IS DENIED.