B-170536, MAR 15, 1971, 50 COMP GEN 627

B-170536, MAR 15, 1971, 50 COMP GEN 627

CONTRACTS - LABOR STIPULATIONS - NONDISCRIMINATION - AFFIRMATIVE ACTION PROGRAMS THE RESPONSIBILITY FOR REVIEWING EQUAL EMPLOYMENT OPPORTUNITY (EEO), COMPLIANCE HAVING BEEN ASSIGNED BY THE SECRETARY OF LABOR IN IMPLEMENTING EXECUTIVE ORDER NO. 11246, TO AGENCIES ON THE BASIS OF INDUSTRIAL CLASSIFICATION, THE GENERAL SERVICES ADMINISTRATION PROPERLY REVIEWED EEO COMPLIANCE BY THE LOW BIDDER ON THE LINOLEUM PORTION OF ITS INVITATION FOR BIDS AND RELIED ON THE INFORMATION FURNISHED BY THE AGENCY RESPONSIBLE FOR DETERMINING COMPLIANCE BY THE LOW BIDDER ON FLOOR TILES. ALTHOUGH PURSUANT TO 41 CFR 60-1.40(A) A PRIME CONTRACTOR IS REQUIRED "TO DEVELOP A WRITTEN AFFIRMATIVE ACTION COMPLIANCE PROGRAM FOR EACH OF ITS ESTABLISHMENTS," THE ADMINISTRATIVE DETERMINATION THAT LACK OF DE FACTO CONTROL BY THE FLOOR TILE CONTRACTOR OF A SUBSIDIARY EXCLUDES COMPLIANCE AS TO THAT SUBSIDIARY IS ACCEPTED AS VALID IN THE ABSENCE THE DETERMINATION WAS ARBITRARY, CAPRICIOUS, OR NOT SUPPORTED BY THE EVIDENCE. AGENTS - OF PRIVATE PARTIES - AUTHORITY - CONTRACTS - SIGNATURES UNDER THE RULE THAT THERE IS NO PROHIBITION TO FURNISHING PROOF OF AGENCY AFTER BID OPENING - ALTHOUGH REQUIRING BIDDERS TO SUBMIT SUCH PROOF BEFORE BID OPENING IS RECOMMENDED TO AVOID CHALLENGES FROM OTHER BIDDERS - THE CONFIRMATION AFTER BID OPENING OF AN EMPLOYEE'S AUTHORITY TO BIND HIS EMPLOYER WAS PROPERLY ACCEPTED AND THE BID CONSIDERED RESPONSIVE, ENTITLING THE LOW BIDDER TO A CONTRACT AWARD.

TO THE APACHE FLOORING COMPANY, MARCH 15, 1971:

THIS IS IN REPLY TO YOUR LETTER OF JULY 22, 1970, AND SUBSEQUENT COMMUNICATIONS, RELATIVE TO YOUR PROTEST AGAINST THE AWARD OF GENERAL SERVICES ADMINISTRATION (GSA) CONTRACT NO. GS-10S-29014 TO ARMSTRONG CORK COMPANY, UNDER INVITATION FOR BIDS NO. SEAS-0227.

THE INVITATION WAS ISSUED ON JANUARY 14, 1970, FOR BIDS ON INDEFINITE QUANTITIES OF FLOOR TILE AND LINOLEUM FOR THE PERIOD MARCH 15, 1970, THROUGH MARCH 14, 1971. ARMSTRONG WAS THE LOW BIDDER AS TO GROUP II, CATEGORIES A AND B, AND RECEIVED THE AWARD ON FEBRUARY 24, 1970. APACHE WAS THE LOW BIDDER ON GROUPS I-A, IV, AND V, BUT DID NOT RECEIVE ITS AWARD UNDER THE SAME SOLICITATION UNTIL MARCH 5, 1970.

YOU CONTEND THAT THE AWARD TO ARMSTRONG WAS ILLEGAL SINCE THE SIGNATURE APPEARING ON THE ARMSTRONG BID WAS INVALID AT THE TIME OF BID OPENING. YOU ALSO ALLEGE THAT IN AWARDING THE CONTRACTS GSA ACCORDED ARMSTRONG PREFERENTIAL TREATMENT IN THAT ARMSTRONG WAS NOT REQUIRED TO COMMIT ITSELF TO FURNISHING AN AFFIRMATIVE ACTION COMPLIANCE PROGRAM FOR EACH OF ITS ESTABLISHMENTS, WHEREAS YOU RECEIVED YOUR AWARD ONLY AFTER YOU HAD BEEN COMPELLED TO SIGN A COMMITMENT TO SUBMIT SUCH PLANS WITHIN 30 DAYS. YOU REQUEST THE SUSPENSION OF PAYMENT TO ARMSTRONG ON THE BASIS THAT THE COMPANY IS NOW IN DEFAULT OF ITS CONTRACT BECAUSE IT HAS FAILED TO DEVELOP AN AFFIRMATIVE ACTION PLAN FOR EACH OF ITS ESTABLISHMENTS AS REQUIRED BY THE CONTRACT. YOU FURTHER CONTEND THAT GSA HAS CONTINUED TO ACCORD ARMSTRONG PREFERENTIAL TREATMENT BY FAILING TO ENFORCE EQUAL EMPLOYMENT OPPORTUNITY (EEO) REQUIREMENTS AGAINST ARMSTRONG WHILE REQUIRING ADHERENCE BY APACHE TO THE EEO PROVISIONS OF ITS CONTRACT.

IT IS NOTED THAT THE QUESTIONS REGARDING THE VALIDITY OF THE SIGNATURE APPEARING ON THE ARMSTRONG BID AND THE FAIRNESS OF THE PREAWARD COMPLIANCE REVIEWS WERE CONSIDERED BY THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA IN APACHE FLOORING COMPANY V ROBERT L. KUNZIG, ADMINISTRATOR OF GENERAL SERVICES ADMINISTRATION, CIVIL ACTION NO. 729- 70. WHILE THE ACTION WAS SUBSEQUENTLY DISMISSED WITHOUT PREJUDICE, IN A PREVIOUS DENIAL OF YOUR "MOTION FOR INJUNCTION PENDENTE LITE" THE COURT STATED AS A CONCLUSION OF LAW:

E. L. MICHENER WAS AUTHORIZED TO SIGN THE OFFER WHICH ARMSTRONG SUBMITTED TO DEFENDANT, AND EVIDENCE OF HIS AUTHORITY TO DO SO WAS DULY FURNISHED DEFENDANT PRIOR TO THE AWARD OF THE CONTRACTS INVOLVED IN THIS CAUSE. ARMSTRONG'S OFFER WAS RESPONSIVE TO DEFENDANT'S SOLICITATION.

THE COURT ALSO MADE THE FACTUAL FINDING THAT "PLAINTIFF HAS NOT PROVEN THAT DEFENDANT HAS SHOWN FAVORITISM TO ARMSTRONG WITH RESPECT TO THE CONTRACT HEREIN."

EXECUTIVE ORDER NO. 11246, SEPTEMBER 24, 1965, AS AMENDED, SETS FORTH POLICIES REGARDING EQUAL EMPLOYMENT OPPORTUNITY. UNDER SECTION 201 OF THE ORDER THE SECRETARY OF LABOR IS AUTHORIZED TO ADOPT RULES AND REGULATIONS AND ISSUE SUCH ORDERS AS HE DEEMS NECESSARY AND APPROPRIATE TO ACHIEVE THE PURPOSES OF THE ORDER IN GOVERNMENT CONTRACTS. PURSUANT TO REGULATIONS EXISTING UNTIL OCTOBER 24, 1969, RESPONSIBILITY FOR REVIEWING EEO COMPLIANCE WAS ASSIGNED TO THE AGENCY DOING THE LARGEST CONTRACT DOLLAR VOLUME WITH THE CONTRACTOR AT THE TIME THE LAST COMPLIANCE REPORT WAS FILED. GSA HAS ADVISED US THAT BASED ON SUCH DOLLAR VOLUME, IT HAD THE COMPLIANCE RESPONSIBILITY FOR APACHE, BUT NOT ARMSTRONG. ON OCTOBER 24, 1969, THE DEPARTMENT OF LABOR ISSUED ORDER NO. 1 IN WHICH IT ASSIGNED COMPLIANCE RESPONSIBILITY ACCORDING TO INDUSTRIAL CLASSIFICATIONS RATHER THAN DOLLAR VOLUME. STANDARD INDUSTRIAL CODES (SIC) WERE DEVELOPED AND GSA WAS ASSIGNED COMPLIANCE RESPONSIBILITY FOR CODE 50-59, WHOLESALE AND RETAIL TRADE. APACHE, THEREFORE, CONTINUED TO BE WITHIN THE COMPLIANCE RESPONSIBILITY OF GSA. THE DEPARTMENT OF THE INTERIOR (INTERIOR) WAS GIVEN RESPONSIBILITY FOR CODE 30, RUBBER AND PLASTIC PRODUCTS, WHICH, AS EXPLAINED BELOW, WAS BELIEVED TO COVER THE ARMSTRONG FACILITY WHICH MANUFACTURED FLOOR TILE.

WE HAVE BEEN ADVISELY BY GSA THAT ON FEBRUARY 6, 1970, REQUESTS FOR EEO PREAWARD CLEARANCES WERE RECEIVED BY THE CONTRACT COMPLIANCE STAFF, GSA, FOR THE PROCUREMENT OF VINYL, ASBESTOS AND ASPHALT FLOOR TILE FROM ARMSTRONG CORK COMPANY, LANCASTER, PENNSYLVANIA, AND APACHE FLOORING COMPANY, SCOTTSDALE, ARIZONA. SINCE GSA HAD COMPLIANCE RESPONSIBILITY FOR APACHE AND THE PROPOSED CONTRACT INVOLVED MORE THAN $100,000, A REVIEW OF THE COMPLIANCE STATUS OF APACHE (ON THE BASIS OF INFORMATION CURRENTLY AVAILABLE TO GSA) WAS MADE PURSUANT TO SECTION 5-12.805 1(C)(3) OF THE GSA PROCUREMENT REGULATIONS. AS A RESULT OF THIS REVIEW GSA ADVISED YOU BY LETTER OF FEBRUARY 27, 1970, THAT ALTHOUGH YOUR COMPANY HAD PERFORMED SEVERAL GOVERNMENT CONTRACTS AN EXAMINATION OF GSA FILES FAILED TO INDICATE THAT AN AFFIRMATIVE ACTION PLAN WAS ON FILE FOR YOUR FIRM. CONTRACTORS WITH 50 OR MORE EMPLOYEES AND A CONTRACT OF $50,000 OR MORE ARE REQUIRED BY 41 CFR 60-1.40(C) TO DEVELOP SUCH PLANS WITHIN 120 DAYS FROM THE COMMENCEMENT OF THE CONTRACT. ACCORDINGLY, GSA REQUESTED A COMMITMENT THAT YOU WOULD SUBMIT AFFIRMATIVE ACTION PLANS FOR YOUR ESTABLISHMENTS WITHIN 30 DAYS. IN THIS CONNECTION WE ARE ADVISED BY GSA THAT ITS TREATMENT OF APACHE WAS IDENTICAL TO ITS TREATMENT OF OTHER FIRMS UNDER THE SAME OR SIMILAR CIRCUMSTANCES. THE RECORD DOES NOT INDICATE THAT YOU OBJECTED TO GSA'S REQUEST, AND ALTHOUGH YOU PROVIDED THAT AGENCY WITH AFFIRMATIVE ACTION PLANS IT IS REPORTED THAT THOSE PLANS WERE NOT ACCEPTABLE. IN ADDITION, WE HAVE BEEN ADVISED THAT AS OF OCTOBER 13, 1970, THE DATE OF THE INITIAL ADMINISTRATIVE REPORT, YOU HAD NOT PROVIDED GSA WITH ACCEPTABLE AFFIRMATIVE ACTION PLANS FOR ALL OF YOUR ESTABLISHMENTS.

THE SIC LISTING FOR ARMSTRONG FACILITIES IN LANCASTER SHOWED THREE LOCATIONS CODED AS FOLLOWS:

LIBERTY STREET - 249 (GSA)

LIBERTY & MARY STREETS - 249 (GSA)

NEW HOLLAND AVENUE - 307 (INTERIOR)

SINCE CODE 249 IS ASSIGNED TO LUMBER AND WOOD PRODUCTS, AND CODE 307 TO RUBBER AND PLASTIC PRODUCTS, IT WAS CONCLUDED THAT THE COMMODITY BEING PURCHASED WAS COVERED UNDER RUBBER AND PLASTIC PRODUCTS AND THAT THE EEO COMPLIANCE REVIEW WAS THEREFORE THE RESPONSIBILITY OF INTERIOR.

IN THIS RESPECT YOUR PROTEST POINTS OUT THAT ARMSTRONG'S BID ACTUALLY LISTED THE BIDDER'S ADDRESS ON PAGE ONE OF THE BID AS "LIBERTY AND CHARLOTTE STREETS, LANCASTER, PENNSYLVANIA." YOU ARGUE THAT THE PLANT WAS ASSIGNED TO GSA SINCE IT HAD PRODUCED CORK TILE - A WOOD PRODUCT - FALLING UNDER CODE 249. YOU FURTHER ARGUE THAT THE ARMSTRONG FACILITY AT NEW HOLLAND AVENUE DID NOT PRODUCE ASPHALT AND VINYL ASBESTOS TILE AND WAS NOT OWNED BY ARMSTRONG AT THE TIME OF GSA'S CLEARANCE IN FEBRUARY 1970. GRANTING, ARGUENDO, THAT YOUR VERSION OF THE FACTS IS CORRECT, WE FIND NO EVIDENCE THAT THESE FACTS WERE OR SHOULD HAVE BEEN APPARENT TO THE GSA CONTRACT COMPLIANCE STAFF AT THAT TIME, AND SINCE THE SIC LISTINGS FOR ARMSTRONG IN LANCASTER DO NOT SHOW A LISTING FOR LIBERTY AND CHARLOTTE STREETS, IT DOES NOT APPEAR THAT THE CONTRACT COMPLIANCE STAFF WAS REMISS IN ITS ACTIONS IN THIS CONNECTION.

YOU ALSO STATE THAT PAGE 11 OF THE ARMSTRONG BID SHOWED FACILITIES LOCATED AT LANCASTER, PENNSYLVANIA; KANKAKEE, ILLINOIS; JACKSON, MISSISSIPPI; AND SOUTH GATE, CALIFORNIA, AS INSPECTION POINTS FOR THE ITEMS WHICH WERE BID UPON. IT APPEARS THAT THE LATTER THREE FACILITIES WERE CODED AS THE RESPONSIBILITY OF GSA AND THAT GSA HAD NOT RECOGNIZED THIS AT THE TIME OF THE EEO CLEARANCE. HOWEVER, WE FIND NO EVIDENCE OF BAD FAITH ON THE PART OF THE CONTRACTING OFFICER FROM THE FACT THAT THE GSA CONTRACT COMPLIANCE STAFF WAS NOT ADVISED OF THE INSPECTION POINTS OF THE SUPPLIES. THE RECORD SHOWS THAT ON THE INFORMATION IN ITS POSSESSION THE CONTRACT COMPLIANCE STAFF PROPERLY REQUESTED ADVICE FROM INTERIOR AS TO THE COMPLIANCE STATUS OF ARMSTRONG AND WAS ADVISED THAT PURSUANT TO THE APPLICABLE REGULATION, 41 CFR 60-1.20(D), NO PREAWARD REVIEW OF ARMSTRONG'S COMPLIANCE POSTURE WAS REQUIRED OF INTERIOR SINCE THE AWARD WOULD INVOLVE A CONTRACT OF LESS THAN $1,000,000. IN ITS REPORT TO THIS OFFICE, GSA EXPRESSED THE BELIEF THAT INTERIOR HAD NO ADVERSE INFORMATION CONCERNING THE COMPLIANCE STATUS OF ARMSTRONG AND, BASED ON THIS CLEARANCE, THE AWARD WAS MADE TO ARMSTRONG FOR THOSE ITEMS ON WHICH IT WAS THE LOW BIDDER.

UNDER 41 U.S.C. 253(B) AWARDS ARE REQUIRED TO BE MADE TO THE LOW, RESPONSIVE AND RESPONSIBLE BIDDER. HERE, THE BIDS OF APACHE AND ARMSTRONG WERE RESPONSIVE, THOSE FIRMS WERE DETERMINED TO BE RESPONSIBLE CONTRACTORS BY GSA, AND BOTH COMPANIES RECEIVED THE CONTRACTS FOR WHICH THEIR BIDS WERE LOW. ALTHOUGH DIFFERENT ADMINISTRATIVE ACTIONS WERE INVOLVED IN EVALUATING THE EEO COMPLIANCE POSTURE OF THE TWO FIRMS, WE BELIEVE THE REASONS FOR THE DIVERGENT ACTIONS ARE ADEQUATELY EXPLAINED ABOVE. IN ANY EVENT, SUCH ACTIONS WERE SUBSEQUENT TO THE BIDDING, WITHOUT EFFECT ON THE COMPETITION, AND WE DO NOT FIND THEREIN ANY FIRM BASIS ON WHICH WE CAN HOLD THAT ARMSTRONG'S CONTRACT IS SO CLEARLY ILLEGAL AS TO REQUIRE ITS CANCELLATION.

IT IS ALSO YOUR POSITION THAT ARMSTRONG IS NOW IN DEFAULT OF ITS CONTRACT SINCE IT HAS FAILED TO DEVELOP AN AFFIRMATIVE ACTION PLAN FOR EACH OF ITS ESTABLISHMENTS AS REQUIRED BY 41 CFR 60-1.40(C). UNDER PARAGRAPH (4) OF THE EQUAL EMPLOYMENT OPPORTUNITY CLAUSE, WHICH WAS INCORPORATED INTO THE SUBJECT CONTRACTS BY REFERENCE, THE CONTRACTOR AGREES TO COMPLY WITH THE PROVISIONS OF EXECUTIVE ORDER NO. 11246 AND OF THE RULES, REGULATIONS, AND RELEVANT ORDERS OF THE SECRETARY OF LABOR. YOU STATE THAT GSA HAS ACCORDED ARMSTRONG PREFERENTIAL TREATMENT BY ITS FAILURE TO ENFORCE EEO REQUIREMENTS AGAINST ARMSTRONG WHILE REQUIRING ADHERENCE BY APACHE TO THE EEO PROVISIONS OF ITS CONTRACT. SPECIFICALLY, YOU ARGUE THAT ARMSTRONG'S CONTRACT AND THE APPLICABLE REGULATIONS OF THE SECRETARY OF LABOR REQUIRED THAT FIRM TO DEVELOP A WRITTEN AFFIRMATIVE ACTION COMPLIANCE PLAN FOR EACH OF ITS ESTABLISHMENTS WITHIN 120 DAYS FROM THE COMMENCEMENT OF ITS CONTRACT AND THAT THIS REQUIREMENT MUST BE CONSTRUED, FOR SEVERAL REASONS, TO INCLUDE THE THOMASVILLE FURNITURE INDUSTRIES, INC., THE E & B CARPET MILLS AND THE EMPIRE CARPET CORPORATION, WHICH ARE ALL ARMSTRONG SUBSIDIARIES. YOU SUBMIT THAT ARMSTRONG IS IN DEFAULT OF ITS CONTRACT SINCE THE RECORD SHOWS THAT THE COMPANY FAILED TO DEVELOP A PLAN FOR ITS THOMASVILLE FURNITURE FACILITIES.

THE QUESTION OF WHETHER ARMSTRONG IS IN DEFAULT OF ITS CONTRACT FOR THE ABOVE REASON IS FOR CONSIDERATION IN THE FIRST INSTANCE BY THE CONTRACTING AGENCY. PURSUANT TO 41 CFR 60-1.6 EACH AGENCY IS PRIMARILY RESPONSIBLE FOR OBTAINING COMPLIANCE WITH THE EEO REQUIREMENTS, AND PURSUANT TO 41 CFR 60-1.1 THE PROCEDURES SET FORTH IN THAT REGULATION GOVERN ALL DISPUTES RELATIVE TO A CONTRACTOR'S COMPLIANCE WITH HIS OBLIGATIONS UNDER THE EEO CLAUSE, REGARDLESS OF WHETHER OR NOT HIS CONTRACT CONTAINS A "DISPUTES" CLAUSE. THE QUESTION OF WHETHER ARMSTRONG'S AFFIRMATIVE ACTION COMMITMENTS REQUIRE SUBMISSION OF A PLAN FOR ITS THOMASVILLE FACILITIES HAS BEEN CONSIDERED BY GSA, AND IT IS THE POSITION OF GSA THAT AN AFFIRMATIVE ACTION PLAN IS NOT REQUIRED FOR THE THOMASVILLE FACILITIES. WE PROVIDED YOU WITH A COPY OF A GSA LEGAL MEMORANDUM DATED JANUARY 28, 1971, TO THIS EFFECT. THAT MEMORANDUM SET OUT THE DEPARTMENT OF LABOR GUIDELINES USED FOR DETERMINING WHETHER AN AFFIRMATIVE ACTION PLAN MUST BE FILED ON A SUBSIDIARY CORPORATION BY REASON OF THE PARENT CORPORATION'S CONTRACT WITH THE GOVERNMENT. ONE OF THE PRIMARY GUIDELINES CITED THEREIN IS THAT IN ORDER TO IMPOSE THE REQUIREMENT THE PARENT CORPORATION MUST HAVE A DE FACTO DAY-TO-DAY EXERCISE OF CONTROL OVER THE OPERATIONS OF THE OTHER CORPORATION, AS CONTRASTED WITH POTENTIAL CONTROL. IN THIS CONNECTION GSA FOUND THAT WHILE ARMSTRONG HAS POTENTIAL CONTROL OVER THE DAY-TO-DAY OPERATIONS OF THOMASVILLE, IT DOES NOT ACTUALLY OR ACTIVELY EXERCISE SUCH CONTROL. IT FURTHER FOUND THAT EACH OF THE CORPORATIONS ACTS IN ITS DAILY OPERATIONS AS AN AUTONOMOUS SEPARATE CORPORATE ENTITY.

THE GSA FINDINGS AND DECISION WERE REVIEWED BY THE DEPARTMENT OF LABOR (SEE 41 CFR 60-1.24(C)(1)) AND BY ITS LETTER DATED FEBRUARY 26, 1971, THE SOLICITOR OF LABOR ADVISED YOU THAT GSA HAD APPROPRIATELY APPLIED LABOR'S GUIDELINES FOR DETERMINING SUCH MATTERS, AND THAT THE DEPARTMENT COULD NOT CONCLUDE THAT GSA'S FINDINGS AND CONCLUSIONS ARE ERRONEOUS. WITH YOUR LETTER OF MARCH 8, 1971, TO THIS OFFICE YOU SUBMITTED CONSIDERABLE MATERIAL WHICH YOU CONTEND AMPLY DEMONSTRATES THE INTIMATE CONTROL OF THOMASVILLE BY ARMSTRONG, AND YOU REQUEST THAT WE DECIDE WHETHER ARMSTRONG IS IN COMPLIANCE WITH IT, CONTRACTUAL REQUIREMENTS FOR AFFIRMATIVE ACTION PLANS.

IN ESSENCE, YOU CONTEND THAT THE PREVIOUS PROVISIONS OF 41 CFR 60 1.40(A), WHICH REQUIRES EACH PRIME CONTRACTOR TO "DEVELOP A WRITTEN AFFIRMATIVE ACTION COMPLIANCE PROGRAM FOR EACH OF ITS ESTABLISHMENTS," CANNOT PROPERLY BE INTERPRETED SO AS TO EXCLUDE THOSE SUBSIDIARIES OR "ESTABLISHMENTS" OF THE PRIME CONTRACTOR OVER WHICH THE PRIME CONTRACTOR DOES NOT EXERCISE DE FACTO CONTROL. THE REGULATION IN QUESTION DOES NOT DEFINE THE TERM "ESTABLISHMENTS." HOWEVER, AS INDICATED ABOVE, UNDER THE TERMS OF PARAGRAPH (4) OF THE EEO CLAUSE WHICH IS REQUIRED TO BE INCLUDED IN CONTRACTS SUCH AS ARMSTRONG'S (41 CFR 60-1.4(A)) THE CONTRACTOR AGREES TO COMPLY WITH THE RULES, REGULATIONS AND RELEVANT ORDERS OF THE SECRETARY OF LABOR ISSUED PURSUANT TO EXECUTIVE ORDER NO. 11246. THE REGULATION QUOTED ABOVE (41 CFR 60-1.40(A)) IS ISSUED PURSUANT TO EXECUTIVE ORDER NO. 11246, AND 41 CFR 60-1.44 PROVIDES THAT RULINGS UNDER, OR IN INTERPRETATIONS OF, SUCH REGULATIONS SHALL BE MADE BY THE SECRETARY OF LABOR OR HIS DESIGNEE. UNDER SUCH CIRCUMSTANCES, THIS OFFICE MUST ACCEPT THE INTERPRETATIONS OF THE OFFICIALS CHARGED WITH THE ADMINISTRATION OF THE CONTRACT PROVISIONS AND THE RESOLUTION OF DISPUTES ARISING OUT OF THOSE PROVISIONS UNLESS IT IS CLEARLY AND CONVINCINGLY DEMONSTRATED THAT THEY ARE ARBITRARY, CAPRICIOUS, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. WHILE THE LITERAL LANGUAGE OF 41 CFR 60-1.40(A), AS QUOTED ABOVE, DOES NOT PERMIT THE EXCLUSION OF ANY "ESTABLISHMENTS" OF A PRIME CONTRACTOR, WE BELIEVE IT IS APPARENT FROM A READING OF THE REGULATIONS AS A WHOLE THAT SUCH A STRICT INTERPRETATION IS NOT INTENDED. THUS, 41 CFR 60 1.5(B)(2) PROVIDES THAT THE DIRECTOR, OFFICE OF FEDERAL CONTRACT COMPLIANCE, OR HIS DESIGNEE, MAY EXEMPT FROM THE REQUIREMENTS OF THE EQUAL OPPORTUNITY CLAUSE ANY OF A PRIME CONTRACTOR'S FACILITIES WHICH HE FINDS TO BE IN ALL RESPECTS SEPARATE AND DISTINCT FROM ACTIVITIES OF THE PRIME CONTRACTOR WHICH ARE RELATED TO THE PERFORMANCE OF THE CONTRACT, IF SUCH EXEMPTION WILL NOT INTERFERE WITH OR IMPEDE EFFECTUATION OF EXECUTIVE ORDER NO. 11246. WE BELIEVE THE DEPARTMENT OF LABOR GUIDELINES, AS SET OUT IN GSA'S LEGAL MEMORANDUM OF JANUARY 28, 1971, AND AFFIRMED IN THE DEPARTMENT OF LABOR'S LETTER OF FEBRUARY 26, 1971, TO YOU, ARE CONSISTENT WITH THE PROVISIONS OF 41 CFR 60 1.5(B)(2). ACCORDINGLY, WE SEE NO VALID BASIS ON WHICH TO DISAGREE WITH THAT PORTION OF THE DEPARTMENT OF LABOR'S GUIDELINES WHICH SETS OUT LACK OF DE FACTO CONTROL BY THE CONTRACTOR OVER THE OPERATIONS OF ONE OF ITS SUBSIDIARIES AS A VALID BASIS FOR EXEMPTING SUCH SUBSIDIARY FROM THE REQUIREMENTS OF THE EQUAL EMPLOYMENT OPPORTUNITY CLAUSE.

CONCERNING THE QUESTION OF WHETHER ARMSTRONG DOES, IN FACT, EXERCISE DE FACTO CONTROL OVER THOMASVILLE, WE HAVE REVIEWED THE EVIDENCE AND ARGUMENTS DEVELOPED BY GSA, AS WELL AS THOSE WHICH YOU SUBMITTED. BASED UPON SUCH REVIEW WE MUST CONCLUDE THAT THERE WAS SUBSTANTIAL EVIDENCE TO SUPPORT THE CONCLUSION REACHED BY GSA AND CONCURRED IN BY THE DEPARTMENT OF LABOR. ACCORDINGLY, WE SEE NO VALID BASIS ON WHICH TO OBJECT TO GSA'S REFUSAL TO REQUIRE ARMSTRONG TO SUBMIT AN AFFIRMATIVE ACTION PLAN FOR ITS THOMASVILLE FACILITIES.

FINALLY, YOU ASSERT THAT THE CONTRACT WAS ILLEGALLY AWARDED TO ARMSTRONG, ON THE BASIS THAT AN INVALID SIGNATURE WAS AFFIXED TO ARMSTRONG'S BID BY AN EMPLOYEE, MR. E. L. MICHENER, WHO WAS NOT AN OFFICER OF THE COMPANY AT THE TIME THE BID WAS SUBMITTED. YOU POINT OUT THAT THE ONLY EVIDENCE OF AUTHORITY IN THE POSSESSION OF GSA AT THE TIME OF BID OPENING WAS A STANDARD FORM 129 WHICH LISTED MR. E. L. MICHENER, MANAGER, SALES ADMINISTRATION, FLOOR DIVISION, AS ONE OF THREE PERSONS AUTHORIZED TO SIGN BIDS, OFFERS AND CONTRACTS FOR THE ARMSTRONG CORK COMPANY, BUT THAT THIS FORM, HAVING BEEN SIGNED BY MR. MICHENER, WAS A SELF-SERVING DECLARATION AND OF NO LEGAL EFFECT. WHILE, SUBSEQUENT TO BID OPENING, A VICE PRESIDENT OF ARMSTRONG HAS CONFIRMED MR. MICHENER'S AUTHORITY, YOU CONTEND THAT SINCE SUCH EVIDENCE WAS PREPARED AFTER BID OPENING IT CANNOT BE ACCEPTED.

YOU CITE OUR DECISION 49 COMP. GEN. 527, MARCH 2, 1970, IN SUPPORT OF YOUR CONTENTION, HOWEVER, THAT DECISION SPECIFICALLY MODIFIES THE PRIOR RULE REQUIRING THE SUBMISSION OF EVIDENCE OF AN AGENT'S BIDDING AUTHORITY BEFORE BID OPENING, WHICH YOU ADVOCATE. IN THAT DECISION WE STATED "WE SEE NO REASON TO PROHIBIT THE FURNISHING OF PROOF OF AGENCY AFTER BID OPENING," ALTHOUGH WE STILL ADVISE AGENTS TO SUBMIT PROOF OF AGENCY BEFORE BID OPENING TO AVOID CHALLENGES FROM OTHER BIDDERS AND RELATED PROBLEMS. ALSO, WHILE WE RECOGNIZE THAT THE COURT PROCEEDINGS IN THIS MATTER WAS DISMISSED WITHOUT PREJUDICE, WE THINK IT IS SIGNIFICANT THAT THE COURT, IN DENYING YOUR ABOVE MOTION FOR A PRELIMINARY INJUNCTION, CONCLUDED THAT ARMSTRONG'S BID WAS RESPONSIVE TO THE GOVERNMENT'S SOLICITATION. THEREFORE HAVE NO OBJECTION TO THE ACCEPTANCE OF ARMSTRONG'S BID AS SUBMITTED BY MR. MICHENER.

FOR THE REASONS STATED, YOUR PROTEST MUST BE DENIED.

THE FILE FORWARED WITH YOUR LETTER OF MARCH 8 IS RETURNED AS REQUESTED.