B-162881, MAY 6, 1968

B-162881, MAY 6, 1968

TO WEISLER AND WEISLER:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 12, 1968, REQUESTING RECONSIDERATION OF OUR DECISION B-162881, APRIL 10, 1968, WHEREIN WE DENIED THE PROTEST OF BERN KANE PRODUCTS, INC., AGAINST THE NEGOTIATION PROCEDURES FOLLOWED WITH RESPECT TO THE LABOR SURPLUS SET-ASIDE PORTION OF INVITATION FOR BIDS NO. DSA100-67-B-2224, ISSUED BY THE DEFENSE SUPPLY AGENCY, DEFENSE PERSONNEL SUPPORT CENTER.

YOUR REQUEST FOR RECONSIDERATION IS PREDICATED UPON THE ARGUMENT THAT THE REFERENCED DECISION WAS NOT TOTALLY RESPONSIVE TO ALL OF THE CONTENTIONS YOU PRESENTED IN SUPPORT OF THE PROTEST. SPECIFICALLY, YOU STATE AS FOLLOWS: "WE CAN FIND NO CONSIDERATION OF THE VERY TELLING ARGUMENT ADVANCED BY BOTH THE SBA AND THE WRITER TO THE EFFECT THAT BERN KANE PRODUCTS, INC. COULD, PRIOR TO THE AWARD OF THE SET ASIDE PORTION, CHANGE ITS PLACE OF MANUFACTURE. THIS IS VERY IMPORTANT AND SHOULD BE CONSIDERED, DUE TO THE FACT THAT ALMOST 6 MONTHS HAD ELAPSED FROM DATE OF BID OPENING TO DATE OF AWARD OF -NON SET-ASIDE- PORTION AND CLOSE TO 10 MONTHS TO DATE, WITH NO AWARD OF -SET-ASIDE- PORTION.'

AT PAGE 6 OF THE DECISION, WE SET FORTH THE POSITION OF THE SMALL BUSINESS ADMINISTRATION (SBA) WITH RESPECT TO PERMITTING BIDDERS TO CHANGE THE PLACES OF MANUFACTURE IDENTIFIED IN THEIR BIDS UPON THE OCCURRENCE OF THE CONDITIONS SPECIFIED IN THE INVITATION. THE FILE DOES NOT, HOWEVER, INDICATE THAT A SIMILAR ARGUMENT WAS ADVANCED BY YOU ON BEHALF OF BERN KANE.

UNDER PARAGRAPH C (3) (C) OF THE LABOR SURPLUS AREA PROVISIONS OF THE INVITATION QUOTED BELOW, A BIDDER MAY CHANGE THE AREA OF PERFORMANCE ORIGINALLY SPECIFIED, IF THE CLASSIFICATION OF THAT AREA IS CHANGED BY THE DEPARTMENT OF LABOR. WE HAVE HELD IN THIS CONNECTION, QUOTING FROM B- 156374, SEPTEMBER 3, 1965, AS FOLLOWS:

"* * * THE PURPOSE OF THE LABOR SURPLUS AREA SET-ASIDE NOTICE WAS TO PERMIT A DETERMINATION ON THE BASIS OF DATA CONTAINED IN THE BID OF THE PRIORITY CATEGORY INTO WHICH ANY GIVEN BIDDER WOULD FALL. PARAGRAPH (C) OF THE NOTICE OF LABOR SURPLUS AREA SET-ASIDE AFFORDED THE ONLY OPPORTUNITY TO BIDDERS TO CHANGE THE SITE OF PERFORMANCE IF CLASSIFICATION OF THE AREA INVOLVED CHANGES AFTER SUBMISSION OF BIDS. ACCORDINGLY, IT IS OUR VIEW THAT THE NOTICE OF LABOR SURPLUS AREA SET ASIDE PRECLUDES BIDDERS FROM CHANGING THE SITE OF PERFORMANCE OR OFFERING A DIFFERENT SITE AFTER BID OPENING, EVEN IF SUCH CHANGE IS, AS YOU ALLEGE, AN ATTEMPT TO CORRECT AN ERROR FROM A MAILING ADDRESS, ERRONEOUSLY INSERTED, TO THE GEOGRAPHICAL SITE WHERE IT WAS INTENDED THAT THE CONTRACT WORK WOULD BE PERFORMED FROM THE BEGINNING. WHILE IT MIGHT HAVE BEEN PREFERABLE TO AFFIRMATIVELY ADVISE BIDDERS OF THE CONSEQUENCES OF THEIR FAILURE TO INDICATE SITES OF PERFORMANCE OR THAT CHANGES IN PRIORITY GROUPS WOULD NOT BE PERMITTED AFTER BID OPENING, THE ENTIRE CONTEXT OF THE SET-ASIDE NOTICE IS CLEARLY OF MATERIAL SIGNIFICANCE IN BID EVALUATION. WE CONSISTENTLY HAVE HELD THAT A BIDDER'S FAILURE TO FURNISH INFORMATION WITH ITS BID WHICH IS NECESSARY FOR COMPLETE BID EVALUATION WILL RENDER HIS BID NONRESPONSIVE AND THAT SUCH NONRESPONSIVENESS MAY NOT BE CURED AFTER BIDS ARE OPENED. THEREFORE, WE DO NOT BELIEVE IT PROPER IN THE CIRCUMSTANCES OF THE INSTANT CASE TO CORRECT GEOGRAPHICAL INFORMATION AFTER THE CONTENTS OF BIDS ARE PUBLICLY REVEALED. SEE 40 COMP. GEN. 432. THIS IS ESPECIALLY TRUE IN YOUR CASE SINCE THE CORRECTION OF GEOGRAPHICAL INFORMATION SUPPLIED BY YOU WITH YOUR BID AFTER BID OPENING WOULD AUTOMATICALLY ADVANCE YOUR PRIORITY FROM GROUP 3 TO GROUP 1 TO THE PREJUDICE OF OTHER BIDDERS.'

PARAGRAPHS (C) (3) (B), (C) AND (D) (3) OF THE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE," AT PAGES 12 AND 13 OF THE INVITATION, PROVIDE AS FOLLOWS:

"/B) IDENTIFICATION OF AREAS OF PERFORMANCE.

"EACH BIDDER DESIRING TO BE CONSIDERED FOR AWARD AS A LABOR SURPLUS AREA CONCERN ON THE SET-ASIDE PORTION OF THE PROCUREMENT SHALL IDENTIFY BELOW, OR ELSEWHERE IN THE BID, THE GEOGRAPHICAL AREAS IN WHICH HE PROPOSES TO PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PORTION OF THE CONTRACT. IF THE BIDDER FAILS TO IDENTIFY BELOW, OR ELSEWHERE IN THE BID, SUCH AREAS, IT WILL BE PRESUMED THAT IT WILL PERFORM OR CAUSE TO BE PERFORMED A SUBSTANTIAL PORTION OF THE CONTRACT AWARDED PURSUANT TO THE SET-ASIDE IN THE SAME PLANT OR PLANTS INDICATED IN THE -PLACE OF PERFORMANCE- PROVISION (DCTSC FORM 31-1). "AREA

"CITY, TOWN, VILLAGE COUNTY STATE

"/C) IF THE DEPARTMENT OF LABOR CLASSIFICATION OF ANY LABOR SURPLUS AREA/S) CHANGES AFTER THE BIDDER HAS SUBMITTED ITS BID, THE BIDDER MAY CHANGE THE AREA/S) IN WHICH IT PROPOSES TO PERFORM, PROVIDED THAT IT SO NOTIFIES THE CONTRACTING OFFICER BEFORE CONTRACT AWARD OF THE SET ASIDE PORTION. PRIORITY FOR NEGOTIATION WILL BE BASED UPON THE LABOR SURPLUS CLASSIFICATION OF THE DESIGNATED PRODUCTION AREAS AS OF THE TIME OF THE PROPOSED AWARD.

"/3) LABOR SURPLUS AREA CONCERN INCLUDES:

"/I) PERSISTENT LABOR SURPLUS AREA CONCERNS WHICH AGREE TO PERFORM OR CAUSE TO BE PERFORMED ANY CONTRACTS AWARDED TO THEM AS LABOR SURPLUS AREA CONCERNS SUBSTANTIALLY IN -AREAS OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS' (ALSO CALLED -AREAS OF SUBSTANTIAL AND PERSISTENT UNEMPLOYMENT-); AND

"/II) SUBSTANTIAL LABOR SURPLUS AREA CONCERNS WHICH AGREE TO PERFORM OR CAUSE TO BE PERFORMED ANY CONTRACTS AWARDED TO THEM AS LABOR SURPLUS AREA CONCERNS SUBSTANTIALLY IN -AREAS OF SUBSTANTIAL LABOR SURPLUS.- "A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN -AREAS OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS' (ALSO CALLED -AREAS OF SUBSTANTIAL AND PERSISTENT UNEMPLOYMENT-) IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS FIRST-TIER SUBCONTRACTORS) IN SUCH AREAS AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE. A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN -AREAS OF SUBSTANTIAL LABOR SURPLUS' IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS FIRST- TIER SUBCONTRACTORS) IN SUCH AREAS OR IN -AREAS OF SUBSTANTIAL OR PERSISTENT LABOR SURPLUS' (ALSO CALLED AREAS OF SUBSTANTIAL AND PERSISTENT UNEMPLOYMENT-) AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE.'

IN OUR OPINION, THEREFORE, THE BIDDER IS PRECLUDED FROM TAKING ANY UNILATERAL ACTION AFFECTING HIS PREVIOUSLY IDENTIFIED AREA OF PERFORMANCE TO IMPROVE HIS RELATIVE POSITION OF PRIORITY OVER THOSE OF OTHER BIDDERS WHO HAD ESTABLISHED AND IDENTIFIED THEIR AREAS OF PERFORMANCE FOR THE PURPOSE OF PRIORITY CLASSIFICATION. AS WE STATED IN OUR APRIL 10, 1968, DECISION: "THE PRIORITY TO BE ESTABLISHED BY THE LABOR SURPLUS CATEGORY, AT THE TIME OF AWARD, IS THE GEOGRAPHIC LOCATION ELECTED BY THE BIDDER IN ITS BID AS THE SITE OF PERFORMANCE OF A SUBSTANTIAL PROPORTION OF THE SET- ASIDE WORK.' A REREADING OF OUR DECISION SHOULD MAKE IT EVIDENT THAT THE ARGUMENT OF SBA WAS CAREFULLY CONSIDERED BUT REJECTED FOR THE REASONS STATED ON PAGE 7 OF THE DECISION.

IN ADDITION, YOU ALLEGE THAT WE FAILED TO CONSIDER THE PROVISIONS OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-801 IN HOLDING THAT BERN KANE IS "ELIGIBLE FOR NEGOTIATION CONSIDERATION ONLY AS A SMALL BUSINESS CONCERN.' YOU REFER TO ASPR 1-801.1 (II) WHICH DEFINES "PERSISTENT LABOR SURPLUS AREA CONCERNS" AS "A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN -AREAS OF PERSISTENT LABOR SURPLUS' IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS FIRST- TIER SUBCONTRACTORS) IN SUCH AREAS AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE.' YOU CONCLUDE THEREFROM THAT THE LOCATION OF FINAL MANUFACTURE IS NOT FINALLY DETERMINATIVE OF THE ISSUE OF WHETHER A BIDDER IS A PERSISTENT LABOR SURPLUS AREA CONCERN. IN YOUR VIEW, EXAMPLE A OF ASPR 1-801.1 SUPPORTS YOUR VIEW THAT THE CONTRACTING OFFICER SHOULD HAVE CONSULTED WITH BERN KANE AS TO ITS SOURCES OF SUPPLY, SINCE "WITHOUT THIS CONSULTATION, HOW COULD THE CONTRACTING OFFICER KNOW WHETHER BERN KANE PRODUCTS, INC. DID NOT QUALIFY AS A CONTRACTOR, WHO WAS ALSO A -PERSISTENT LABOR SURPLUS AREA CONCERN.-"

THE FOREGOING MISCONCEIVES THE IMPORT OF ASPR 1-801.1 SINCE APPLICATION OF THE DEFINITION ,PERSISTENT LABOR SURPLUS AREA CONCERNS" IS DEPENDENT UPON THE INFORMATION IN THE BID CONCERNING THE AREA OR AREAS OF PERFORMANCE. IF THE GEOGRAPHIC AREA OR AREAS SELECTED BY THE BIDDER IN HIS BID HAVE NOT BEEN CLASSIFIED BY THE DEPARTMENT OF LABOR AS PERSISTENT LABOR SURPLUS AREAS THEN, BY DEFINITION, THAT BIDDER IS NOT A PERSISTENT SURPLUS AREA CONCERN. IF, ON THE OTHER HAND, THE BIDDER DOES IDENTIFY IN HIS BID AN AREA OR AREAS CLASSIFIED AS PERSISTENT, THEN THE BIDDER IS PRIMA FACIE ELIGIBLE AS A PERSISTENT LABOR SURPLUS AREA CONCERN. THE EXAMPLES FOLLOWING ASPR 1-801.1 ARE GUIDELINES FOR USE DURING THE SET- ASIDE NEGOTIATIONS TO DETERMINE WHETHER AN ELIGIBLE BIDDER WILL IN FACT INCUR COSTS IN THE IDENTIFIED AREA OR AREAS OF PERSISTENT LABOR SURPLUS IN EXCESS OF 50 PERCENT OF THE CONTRACT PRICE. IN OTHER WORDS, THE EXAMPLES ARE AN AID IN DETERMINING WHETHER AN OTHERWISE ELIGIBLE BIDDER WILL PERFORM A "SUBSTANTIAL" PART OF THE CONTRACT WORK IN AREAS OF LABOR SURPLUS.

BERN KANE INDICATED IN ITS BID THAT IT WOULD PERFORM THE SET-ASIDE PORTION IN BROOKLYN, NEW YORK. SINCE THIS AREA WAS NOT CLASSIFIED BY THE DEPARTMENT OF LABOR AS A LABOR SURPLUS AREA, IT WAS NOT ACCORDED A PREFERRED STATUS FOR NEGOTIATION OF THE SET-ASIDE PORTION. THAT BEING THE CASE, THE CONTRACTING OFFICER HAD NO DUTY TO ASCERTAIN BERN KANE'S SOURCES OF SUPPLY OR TO GIVE BERN KANE A SECOND OPPORTUNITY TO BECOME A PREFERENTIAL ELIGIBLE THROUGH THE USE OF SUPPLIERS LOCATED IN PERSISTENT SURPLUS LABOR AREAS.

WE STATED AT 41 COMP. GEN. 417 THAT EVEN THOUGH A LABOR SURPLUS SET ASIDE IS A NEGOTIATED PROCUREMENT, REQUIREMENTS FOR AND LIMITATIONS ON ELIGIBILITY FOR AWARD OF THE SET-ASIDE WHICH ARE STATED IN THE INVITATION MUST CONTROL THIS ASPECT OF THE PROCUREMENT. BIDDERS WERE CLEARLY WARNED THAT THEIR ELIGIBILITY FOR CONSIDERATION AS A PERSISTENT OR SUBSTANTIAL LABOR SURPLUS AREA CONCERN, FOR THE PURPOSE OF PRIORITY IN THE NEGOTIATION OF THE SET-ASIDE PORTION, WAS PREDICATED UPON THE SUBMISSION OF INFORMATION WITH THEIR BIDS AS TO THE PROPOSED SITE OF PERFORMANCE OF A SUBSTANTIAL PORTION (50 PERCENT OR MORE) OF THE CONTRACT WORK. HENCE, IT WOULD HAVE BEEN PATENTLY IMPROPER TO PERMIT BERN KANE TO IMPROVE ITS PRIORITY POSITION TO THE DISADVANTAGE OF OTHER ELIGIBLE BIDDERS ON THE BASIS OF AFTER-THE-FACT INFORMATION THAT SUPPLIERS IN DISTRESSED LABOR AREAS WOULD PERFORM MORE THAN 50 PERCENT OF THE WORK.

YOU ALSO REQUEST TO BE ADVISED OF THE PROCEDURES TO BE FOLLOWED BY THE CONTRACTING OFFICER TO DETERMINE THE PRIORITY OF NEGOTIATIONS WITH BIDDERS FOR THE LABOR SURPLUS SET-ASIDE PORTIONS OF THE GOVERNMENT PROCUREMENTS. YOU CONTEND, IN THIS RESPECT, THAT THE CONTRACTING OFFICER MUST NEGOTIATE WITH ALL RESPONSIBLE AND RESPONSIVE BIDDERS WHO SUBMITTED BIDS WITHIN 120 PERCENT OF THE AWARD PRICE OF THE NON-SET ASIDE PORTION. YOU STATE THAT "ONLY THEN, CAN THE CONTRACTING OFFICER BE IN A POSITION TO DETERMINE PRIORITY," AND THAT BERN KANE, THE SUCCESSFUL BIDDER ON THE NON-SET-ASIDE PORTION, WAS NOT GIVEN AN OPPORTUNITY TO ESTABLISH ITS POSITION FOR PURPOSES OF PRIORITY.

THE PROCEDURES GOVERNING THE DETERMINATION OF PRIORITY FOR NEGOTIATION OF THE SET-ASIDE PORTION OF THE PRESENT PROCUREMENT WERE SET FORTH IN THE LABOR SURPLUS AREA SET-ASIDE CLAUSES OF THE INVITATION, AND MORE PARTICULARLY IN PART 8, SECTION I, OF ASPR. WE ARE ENCLOSING A COPY OF OUR DECISION B-163652 DATED APRIL 12, 1968, TO FURTHER AMPLIFY OUR POSITION IN THIS AREA OF GOVERNMENT PROCUREMENT.

BASED ON ADVICE FROM SBA, WE ARE UNABLE TO COMPLY WITH YOUR REQUEST THAT YOU BE FURNISHED WITH A COPY OF THE LETTER TRANSMITTED TO OUR OFFICE BY THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION, COMMENTING ON THE BERN KANE PROTEST. WE SUGGEST THEREFORE THAT YOU COMMUNICATE DIRECTLY WITH SBA.

WE ARE OF THE OPINION THAT THE MERITS OF THE BERN KANE PROTEST UNDER THE SET-ASIDE PORTION OF THE PROCUREMENT HAVE BEEN FULLY CONSIDERED AND WE MUST, THEREFORE, ADVISE THAT NO FURTHER ACTION WITH RESPECT TO THIS PROCUREMENT WILL BE TAKEN BY OUR OFFICE.