B-175641, JUN 16, 1972, 51 COMP GEN 822

B-175641: Jun 16, 1972

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CONSTRUCTION CONTRACTS - COMBINATION THE USE OF THE ANNUAL BID BOND THAT IS APPLICABLE TO SUPPLIES AND SERVICES WHICH THE LOW BIDDER HAS ON FILE WITH THE CONTRACTING AGENCY IN THE PROCUREMENT OF A HYDROGENERATOR TO BE INSTALLED AND TESTED IN LIEU OF THE PAYMENT AND PERFORMANCE BONDS SPECIFIED IN THE INVITATION FOR BIDS - BONDS GENERALLY REQUIRED ONLY ON CONTRACTS INVOLVING CONSTRUCTION AS OPPOSED TO CONTRACTS FOR SUPPLIES AND SERVICES - IS APPROVED AS BEING LEGALLY SUFFICIENT TO OBLIGATE THE SURETY AS THE CONTRACT CONTEMPLATED CONSISTING OF ONLY 25 PERCENT CONSTRUCTION FALLS WITHIN THE MEANING OF A SUPPLY AND SERVICE CONTRACT CONTAINED IN SECTION 1-12.402-1(A) OF THE FEDERAL PROCUREMENT REGULATIONS (FPR).

B-175641, JUN 16, 1972, 51 COMP GEN 822

BONDS - BID - SUPPLY V. CONSTRUCTION CONTRACTS - COMBINATION THE USE OF THE ANNUAL BID BOND THAT IS APPLICABLE TO SUPPLIES AND SERVICES WHICH THE LOW BIDDER HAS ON FILE WITH THE CONTRACTING AGENCY IN THE PROCUREMENT OF A HYDROGENERATOR TO BE INSTALLED AND TESTED IN LIEU OF THE PAYMENT AND PERFORMANCE BONDS SPECIFIED IN THE INVITATION FOR BIDS - BONDS GENERALLY REQUIRED ONLY ON CONTRACTS INVOLVING CONSTRUCTION AS OPPOSED TO CONTRACTS FOR SUPPLIES AND SERVICES - IS APPROVED AS BEING LEGALLY SUFFICIENT TO OBLIGATE THE SURETY AS THE CONTRACT CONTEMPLATED CONSISTING OF ONLY 25 PERCENT CONSTRUCTION FALLS WITHIN THE MEANING OF A SUPPLY AND SERVICE CONTRACT CONTAINED IN SECTION 1-12.402-1(A) OF THE FEDERAL PROCUREMENT REGULATIONS (FPR), AND SECTION 1-12.402-2 PRESCRIBES THAT LABOR STANDARDS NEED NOT APPLY TO CONTRACTS PREDOMINANTLY FOR NONCONSTRUCTION WORK. FURTHERMORE, THE FAILURE OF THE BIDDER TO USE THE PROPER STANDARD FORM 34, WHERE THE DIFFERENCE IN THE FORMS IS NOT ONE OF SUBSTANCE, MAY BE WAIVED AS A MINOR INFORMALITY PURSUANT TO FPR 1-2.405.

TO THE WESTINGHOUSE ELECTRIC CORPORATION, JUNE 16, 1972:

WE REFER TO YOUR LETTER DATED APRIL 6, 1972, AND SUBSEQUENT CORRESPONDENCE, PROTESTING THE AWARD OF A CONTRACT TO COLT INDUSTRIES OPERATING CORPORATION, FAIRBANKS MORSE POWER SYSTEMS DIVISION (COLT), UNDER INVITATION FOR BIDS (IFB) DS-6938 ISSUED BY THE BUREAU OF RECLAMATION, DENVER, COLORADO. AWARD HAS BEEN WITHHELD PENDING OUR DECISION.

YOUR PROTEST IS ADDRESSED SOLELY TO THE QUESTION OF THE PROPRIETY OF THE USE OF AN ANNUAL BID BOND, LIMITED BY THE FEDERAL PROCUREMENT REGULATIONS (FPR) TO USE WITH RESPECT TO BIDS ON SUPPLY AND SERVICES CONTRACTS ONLY, IN CONNECTION WITH AN INVITATION INVOLVING PART CONSTRUCTION AND PART SUPPLY WORK.

THE BIDDING SCHEDULE SOLICITED BIDS FOR:

FURNISHING, INSTALLING, AND TESTING ONE NEW ARMATURE WINDING RATED 125,000-KVA, UNITY POWER FACTOR, 13,800-VOLT, FOR EXISTING 120-RMP, 3 PHASE 60-HZ, VERTICAL-SHAFT, HYDROGENERATOR, COMPLETE IN ACCORDANCE WITH THIS SOLICITATION AT GRAND COULEE POWERPLANT, INCLUDING SHIPMENT OF THE MATERIALS AND EQUIPMENT TO THE SITE OF INSTALLATION, NEAR COULEE DAM, WASHINGTON ***

IT IS CLEAR FROM THE IFB THAT SOME CONSTRUCTION WORK WAS CONTEMPLATED AS A NECESSARY INCIDENT TO THE INSTALLATION OF THE EQUIPMENT. TO THIS END, SECTION C-10 OF THE IFB REQUIRES THE SUCCESSFUL BIDDER TO FURNISH AT THE TIME OF AWARD A PAYMENT BOND EQUAL TO 12 PERCENT OF THE CONTRACT PRICE AT THE TIME OF AWARD FOR THE PROTECTION OF ALL PERSONS SUPPLYING LABOR AND MATERIALS FOR THE PROSECUTION OF THE WORK. ALSO, SECTION C 11(A) REQUIRES THE CONTRACTOR TO FURNISH AT THE TIME OF AWARD A PERFORMANCE BOND EQUAL TO 25 PERCENT OF THE CONTRACT PRICE AT TIME OF AWARD TO COVER THE FIELD INSTALLATION WORK. EXCEPT FOR CIRCUMSTANCES SPECIFICALLY ENUMERATED IN FPR, AND NOT HERE INVOLVED, PAYMENT AND PERFORMANCE BONDS ARE GENERALLY REQUIRED ONLY ON CONTRACTS INVOLVING CONSTRUCTION, AS OPPOSED TO CONTRACTS FOR SUPPLIES OR SERVICES. THE FACT THAT CONSTRUCTION WORK WAS CONTEMPLATED UNDER THE IFB WAS CONFIRMED AT BID OPENING WITH THE ANNOUNCEMENT OF THE ENGINEERS' ESTIMATE THAT 25 PERCENT OF THE TOTAL CONTRACT AMOUNT WOULD BE FOR INSTALLATION AND TESTING OF THE EQUIPMENT.

FOUR BIDS WERE SUBMITTED AND OPENED ON MARCH 30, 1972, AS FOLLOWS:

COLT $314,440

WESTINGHOUSE ELECTRIC CORP. (WESTINGHOUSE) 317,059

NATIONAL ELECTRIC COIL 324,952

GENERAL ELECTRIC COMPANY 344,675

SECTION A-1(A) OF THE IFB CAUTIONS BIDDERS THAT THE FAILURE TO FURNISH A BID BOND IN AN AMOUNT NOT LESS THAN 20 PERCENT OF THE AMOUNT OF THE BID TO GUARANTEE THE EXECUTION OF ALL NECESSARY CONTRACTUAL DOCUMENTS AND THE FURNISHING OF ALL REQUIRED BONDS WITHIN THE STATED TIME-FRAMES MAY BE CAUSE FOR REJECTION OF THE BID. COLT REFERENCED IN ITS BID ITS ANNUAL BID BOND NO. 27-60-14, STANDARD FORM 34, REVISED NOVEMBER 1950, APPLICABLE TO SERVICES AND SUPPLIES, WHICH IS ON FILE WITH THE BUREAU OF RECLAMATION. WESTINGHOUSE'S BID BOND WAS SUBMITTED ON STANDARD FORM 24, JUNE 1964 EDITION, APPLICABLE TO CONSTRUCTION, SUPPLIES AND SERVICES.

YOU CONTEND THAT THE SUBJECT IFB CONTEMPLATES A CONSTRUCTION CONTRACT FOR PURPOSES OF THE BID BOND REQUIREMENT AND THAT COLT'S SUBMISSION OF AN ANNUAL BID BOND WITH ITS BID COVERING ONLY "SUPPLIES AND SERVICES" IS, THEREFORE, IN VIOLATION OF FPR 1-10.103-1(B). THIS PROVISION STATES THAT "ANNUAL BID BONDS ARE NOT ACCEPTABLE IN CONNECTION WITH BIDS FOR CONSTRUCTION CONTRACTS." YOU ACCORDINGLY MAINTAIN THAT THE COLT BID SHOULD BE REJECTED AS NONRESPONSIVE. IN SUBSTANTIATION OF YOUR CONTENTION, YOU POINT OUT THAT IN ADDITION TO THE REQUIREMENT FOR PERFORMANCE AND PAYMENT BONDS MENTIONED ABOVE, THE INVITATION CONTAINED NUMEROUS OTHER CLAUSES WHICH SPECIFICALLY RELATE TO THE CONSTRUCTION PORTION OF THE PROPOSED WORK. YOU FURTHER MAINTAIN THAT THE CONSTRUCTION WORK IN THIS INSTANCE IS CLEARLY SEGREGABLE FROM THE SUPPLY WORK, CONCLUDING THEREFROM THAT A BID BOND SPECIFICALLY COVERING THE CONSTRUCTION WORK IS CLEARLY REQUIRED. ALTERNATIVELY, YOU ARGUE THAT COLT'S BID BOND WAS SUBMITTED ON A SUPERSEDED FORM WHICH WOULD NOT BIND THE SURETY IN THE EVENT COLT FAILED TO SUBMIT A PAYMENT BOND FOR THE CONSTRUCTION PORTION OF THE WORK, AS REQUIRED.

FPR SUBPART 1-10.1, BONDS, AT SECTION 1-10.102-7 DEFINES A CONSTRUCTION CONTRACT TO MEAN "ANY CONTRACT FOR CONSTRUCTION, ALTERATION, OR REPAIR AS PROVIDED IN SECS 1-12.402-1 AND 1-18.101-1." SUBPART 1-12.4 DEALS WITH LABOR STANDARDS IN CONSTRUCTION CONTRACTS AND PROVIDES AT SECTION 1-12.402 -1(A):

A CONTRACT IS FOR CONSTRUCTION IF IT IS SOLELY OR PREDOMINANTLY FOR CONSTRUCTION, ALTERATION, OR REPAIR *** OF A PUBLIC BUILDING OR PUBLIC WORK. *** (OTHER TYPES OF CONTRACTS INVOLVING CONSTRUCTION WITHIN THE CONTEMPLATION OF THIS SEC 1-12.402 ARE DESCRIBED IN SEC 1 12.402-2.)

SECTION 1-12.402-2 PROVIDES THAT LABOR STANDARDS NEED NOT BE APPLIED TO CONTRACTS PREDOMINANTLY FOR NONCONSTRUCTION WORK WHICH ALSO INVOLVE CONSTRUCTION UNLESS THE CONSTRUCTION WORK IS "SUBSTANTIAL" AND "IS PHYSICALLY OR FUNCTIONALLY SEPARATE FROM, AND, AS A PRACTICAL MATTER, IS CAPABLE OF BEING PERFORMED ON A SEGREGATED BASIS FROM THE OTHER WORK REQUIRED BY THE CONTRACT."

SUBPART 1-18 IS CONCERNED WITH "PROCUREMENT OF CONSTRUCTION" AND PROVIDES AT SECTION 1-18.000:

THIS PART SETS FORTH CONTRACTING PROCEDURES PECULIAR TO CONSTRUCTION CONTRACTS. *** WHERE A CONTRACT COVERS THE PROCUREMENT OF BOTH CONSTRUCTION AND SUPPLIES OR SERVICES, THE CONTRACT SHALL INCLUDE PROVISIONS APPLICABLE TO THE PREDOMINANT PART OF THE WORK, OR SHALL BE DIVIDED INTO PARTS, AND INCLUDE THE PROVISIONS APPROPRIATE FOR EACH PART, BUT SEE SEC 1-12.402-2. ***

IT IS THE POSITION OF THE DEPARTMENT OF THE INTERIOR THAT THE CONTRACT TO BE AWARDED AS A RESULT OF THE SUBJECT INVITATION WILL BE A SUPPLY CONTRACT, NOT A CONSTRUCTION CONTRACT, INASMUCH AS THE PREDOMINANT PORTION OF THE WORK WILL BE THE FURNISHING OF SUPPLIES (75 PERCENT) AND THE CONSTRUCTION WORK MERELY INCIDENTAL THERETO (25 PERCENT). INTERIOR CONCLUDES, AND WE AGREE, THAT THE COLT BID BOND, APPLICABLE ONLY TO "SUPPLIES AND SERVICES," WOULD BE ENFORCEABLE SHOULD COLT FAIL TO EXECUTE CONTRACTUAL DOCUMENTS OR TO FURNISH SUCH BONDS AS ARE REQUIRED BY THE INVITATION TERMS.

FOR THE PURPOSE OF CHARACTERIZING A GIVEN CONTRACT AS EITHER CONSTRUCTION OR SUPPLIES OR SERVICES, THE FPR SUBPART DEALING WITH BONDS, SECTION 1- 10.1, REFERS TO THE FPR SUBPART IN "LABOR STANDARDS FOR CONSTRUCTION CONTRACTS," SECTION 1-12.4, FOR DEFINITION OF A CONSTRUCTION CONTRACT. HOWEVER, THAT REFERENCE IS LIMITED TO THE DEFINITIONAL PURPOSE AND CARRIES NO FURTHER APPLICATION OF THE LABOR STANDARDS SUBPART TO BID BONDS. YOU CORRECTLY ADVANCE THE THEORY THAT SEGREGABILITY OF WORK CARRIES WITH IT THE CONCOMMITANT DUTY TO APPLY LABOR STANDARDS UNDER GIVEN GUIDELINES, EVEN WHEN THE PREDOMINANT PORTION OF THE WORK IS FOR SUPPLIES OR SERVICES. HOWEVER, THAT INQUIRY IS NOT RELEVANT TO THE QUESTION WHETHER THE CONTEMPLATED CONTRACT IS FOR CONSTRUCTION OR SUPPLIES OR SERVICES. RATHER IT EVIDENCES THE POLICY THAT EVEN WHEN A CONTRACT IS FOR SUPPLIES OR SERVICES, CONSIDERATION SHOULD BE GIVEN TO THE INCLUSION OF LABOR STANDARD PROVISIONS. HOWEVER, THAT DETERMINATION MUST BE MADE SEPARATE AND APART FROM THAT RELATING TO THE GENERAL NATURE OF THE CONTRACT.

IN THE CIRCUMSTANCES, THE CONTRACT ADVERTISED IS NOT PREDOMINANTLY FOR CONSTRUCTION WITHIN THE CONTEMPLATION OF FPR SECTION 1-12.402-1(A) SINCE THE CONSTRUCTION PORTION OF THE WORK AMOUNTS TO ONLY 25 PERCENT. THEREFORE CONCLUDE THAT THE CONTRACT TO BE AWARDED WILL BE A SUPPLY CONTRACT AND THAT THE COLT BID BOND APPLICABLE BY ITS TERMS TO CONTRACTS FOR SUPPLIES AND SERVICES IS LEGALLY SUFFICIENT TO OBLIGATE THE SURETY.

CONCERNING THE USE BY COLT OF THE SUPERSEDED 1950 EDITION OF STANDARD FORM 34 IN LIEU OF THE 1964 EDITION OF STANDARD FORM 34 CURRENTLY BEING USED, YOU CONTEND THAT SUCH USE REQUIRES THE REJECTION OF COLT'S BID AS NONRESPONSIVE BECAUSE, IN YOUR OPINION, THE SUPERSEDED FORM WOULD NOT BIND THE SURETY IN THE EVENT A PROPER PAYMENT BOND IS NOT SUBMITTED BY THE CONTRACTOR, AS REQUIRED. IN THIS REGARD, WE HAVE HELD THAT FAILURE TO UTILIZE THE DESIGNATED BOND FORM IS NOT IN ITSELF A SUFFICIENT REASON TO REJECT AN OTHERWISE ACCEPTABLE BID SO LONG AS THE BOND AS SUBMITTED AFFORDS THE GOVERNMENT APPROPRIATE RECOURSE IN THE EVENT THE BIDDER DOES NOT FULFILL THE CONDITIONS OF THE BID. 39 COMP. GEN. 83, 84 (1959). COMPARISON OF THE PROVISIONS OF THE TWO FORMS SHOWS THEM TO BE SUBSTANTIALLY THE SAME. BOTH FORMS OBLIGATE THE SURETY TO MAKE PAYMENTS IN ACCORDANCE WITH THE BID GUARANTEE PROVISIONS OF THE IFB IF THE BIDDER FAILS TO EXECUTE THE NECESSARY CONTRACTUAL DOCUMENTS AND FURNISH THE REQUISITE BONDS. WHILE IT IS TRUE THAT THE FORM UTILIZED BY COLT DOES NOT SPECIFY THAT THE EXECUTION OF A PAYMENT BOND IS COVERED BY ITS TERMS, IT IS OUR OPINION THAT THE OBLIGATION STATED THEREIN TO "GIVE BOND *** , AS MAY BE REQUIRED FOR THE FAITHFUL PERFORMANCE AND PROPER FULFILLMENT OF THE RESULTING CONTRACT" INCLUDES BOTH PERFORMANCE AND PAYMENT BONDS SINCE FULFILLMENT OF THE CONTRACT, BY ITS TERMS, WILL REQUIRE FURNISHING OF BOTH PAYMENT AND PERFORMANCE BONDS. THE DIFFERENCE BETWEEN THE TWO FORMS, THEREFORE, CONSTITUTES ONE OF FORM RATHER THAN SUBSTANCE AND MAY PROPERLY BE WAIVED BY THE CONTRACTING OFFICER AS A MINOR INFORMALITY PURSUANT TO FPR SECTION 1 2.405. B-161904, JULY 17, 1967.

ACCORDINGLY, YOUR PROTEST IS DENIED.