B-145942, B-146040, SEP. 6, 1961

B-145942, B-146040, SEP. 6, 1961

TO THE SECRETARY OF THE ARMY:

THIS HAS REFERENCE TO A LETTER DATED JUNE 29, 1961, WITH ENCLOSURE, FROM THE CHIEF, CONTRACTS DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, DEPARTMENT OF THE ARMY, CONCERNING THE PROTEST OF KINGS POINT INDUSTRIES, INC., UNDER INVITATION FOR BIDS NO. QM/CTM/-36 243-61-718, AND THE PROTESTS OF LITE INDUSTRIES, INC., AND KINGS POINT INDUSTRIES, INC., UNDER INVITATION FOR BIDS NO. QM/MGS/-44-193-61 581.

INVITATION FOR BIDS NO. QM/CTM/-36-243-61-718 WAS ISSUED ON MARCH 23, 1961, BY THE PHILADELPHIA QUARTERMASTER DEPOT, U.S. ARMY, CALLING FOR THE MANUFACTURE OF 11,675 LINK CONNECTING, CHIN STRAP, HOOD FIREMAN, AS ITEM NO. 1, AND 5820 STRAP, CHIN, FIREMAN HOOD, AS ITEM NO. 2, BOTH ITEMS ON AN F.O.B. DESTINATION BASIS.

THE INVITATION PROVIDED THAT AN ADDITIONAL QUANTITY OF 17,498 UNITS OF THE ITEMS CALLED FOR HAD BEEN SET ASIDE FOR AWARD ONLY TO ONE OR MORE LABOR SURPLUS AREA CONCERNS, AND, TO A LIMITED EXTENT, TO SMALL BUSINESS CONCERNS NOT QUALIFYING AS LABOR SURPLUS AREA CONCERNS. IT PROVIDED THAT NEGOTIATIONS FOR THE SET-ASIDE PORTION WOULD BE CONDUCTED ONLY WITH RESPONSIBLE LABOR SURPLUS AREA CONCERNS (AND SMALL BUSINESS CONCERNS TO THE EXTENT INDICATED) WHO HAD SUBMITTED RESPONSIVE BIDS ON THE NON-SET- ASIDE PORTION AT A UNIT PRICE WITHIN 120 PERCENT OF THE HIGHEST AWARD MADE ON THE NON-SET-ASIDE PORTION, IN THE FOLLOWING ORDER OF PRIORITY.

"GROUP 1. PERSISTENT LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 2. OTHER PERSISTENT LABOR SURPLUS AREA CONCERNS.

GROUP 3. SUBSTANTIAL LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 4. OTHER SUBSTANTIAL LABOR SURPLUS AREA CONCERNS.

GROUP 5. SMALL BUSINESS CONCERNS WHICH ARE NOT LABOR SURPLUS AREA CONCERNS.'

A "LABOR SURPLUS AREA" WAS DEFINED AS A "GEOGRAPHICAL AREA" WHICH AT THE TIME OF AWARD IS---

"/I) CLASSIFIED BY THE DEPARTMENT OF LABOR AS AN "AREA OF SUBSTANTIAL LABOR SURPLUS" OR AS AN ,AREA OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS" AND LISTED AS SUCH BY THAT DEPARTMENT IN CONJUNCTION WITH ITS BI-MONTHLY PUBLICATION "AREA LABOR MARKET TRENDS; " OR

"/II) NOT CLASSIFIED AS IN (I) ABOVE, BUT WHICH IS INDIVIDUALLY CERTIFIED AS AN AREA OF PERSISTENT OR SUBSTANTIAL LABOR SURPLUS BY THE DEPARTMENT OF LABOR AT THE REQUEST OF ANY PROSPECTIVE CONTRACTOR.'

A LABOR SURPLUS AREA CONCERN INCLUDES:

"/I) PERSISTENT LABOR SURPLUS AREA CONCERNS WHICH WILL 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; " AND

"/II) SUBSTANTIAL LABOR SURPLUS AREA CONCERNS SUBSTANTIALLY IN "AREAS OF SUBSTANTIAL LABOR SURPLUS.'"

THE SET-ASIDE AWARD WAS TO BE OFFERED AT THE HIGHEST UNIT PRICE AWARDED ON THE NON-SET-ASIDE PORTION, ADJUSTED TO REFLECT TRANSPORTATION AND OTHER COST FACTORS CONSIDERED IN EVALUATING BIDS ON THE NON-SET-ASIDE PORTION.

BID OPENING WAS HELD ON APRIL 13, 1961, AND ON APRIL 28, 1961, LITE INDUSTRIES, INC., WAS AWARDED CONTRACT NO. DA-36-243-QM/CTM/-10205-E-61 (ON THE NON-SET-ASIDE PORTION) FOR BOTH ITEMS NOS. 1 AND 2, ON ITS BID OF ?12 EACH FOR ITEM NO. 1 AND ?91 EACH FOR ITEM NO. 2. KINGS POINT INDUSTRIES, INC., QUOTED ?19 EACH FOR ITEM NO. 1 AND ?99 EACH FOR ITEM NO. 2. BOTH FIRMS CERTIFIED THAT THEY WERE SMALL BUSINESS CONCERNS.

THE BID FORM REQUIRED BIDDERS TO STIPULATE WHERE THE WORK WAS TO BE PERFORMED. LITE INDUSTRIES LISTED ITS PLANT LOCATION AS PATERSON, NEW JERSEY, WHICH IS LOCATED IN A SUBSTANTIAL LABOR SURPLUS AREA, WHEREAS KINGS POINT LISTED ITS PLANT LOCATION AT FAYETTEVILLE, NORTH CAROLINA, A PERSISTENT LABOR SURPLUS AREA.

IT IS REPORTED THAT NEGOTIATIONS FOR THE SET-ASIDE PORTION AT FIRST WERE COMMENCED WITH KINGS POINT SINCE THIS FIRM HAD A HIGHER ORDER OF PRIORITY. HOWEVER, IT WAS ONLY OFFERED ITEM NO. 2 BECAUSE ITS PRICE (?19 EACH) ON ITEM NO. 1 WAS MORE THAN 120 PERCENT OF THE AWARD PRICE ?12 EACH). LITE INDUSTRIES WAS ONLY OFFERED ITEM NO. 1. THEREUPON, IT STATED THAT IT HAD A PLANT AT LONG BRANCH, NEW JERSEY, A PERSISTENT LABOR SURPLUS AREA, AND THAT IT WAS WILLING TO PERFORM THE WORK AT THE LONG BRANCH PLANT. THIS WAS CONFIRMED BY TELEGRAM OF MAY 2, 1961. THE CONTRACTING OFFICER DETERMINED THAT IT WAS PROPER TO ALLOW LITE INDUSTRIES TO CHANGE ITS PLANT LOCATION AND, ON MAY 19, 1961, AN AWARD FOR THE FULL SET-ASIDE PORTION OF THE PROCUREMENT WAS MADE TO LITE INDUSTRIES, INC.

INVITATION FOR BIDS NO. QM/MGS/44-193-61-581 WAS ISSUED BY THE RICHMOND QUARTERMASTER DEPOT, U.S. ARMY, ON MARCH 15, 1961, CALLING FOR BIDS ON 965 BURIAL POUCHES FOR HUMAN REMAINS. BIDS WERE REQUESTED ON AN F.O.B. ORIGIN BASIS ONLY, AND THE INVITATION CONTAINED A LABOR SURPLUS AREA SET-ASIDE CLAUSE (FOR 965 UNITS) SIMILAR TO THE CLAUSE PREVIOUSLY DETAILED.

BID OPENING WAS HELD ON APRIL 13, 1961, AND THE BID ABSTRACT REVEALS THAT FIVE BIDS WERE RECEIVED AS FOLLOWS:

TABLE

UNIT PRICE

NAME BID

KINGS POINT INDUSTRIES (5 PERCENT DISCOUNT - 20 DAYS) $16.12

LITE INDUSTRIES, INC. (5 PERCENT DISCOUNT - 20 DAYS) 15.66

TRENTON TEXTILE CO. 49.63

BOYD HARNESS CO. 42.50

CORBITT MFG.CO. 19.85

THE INVITATION CONTAINED THE FOLLOWING CLAUSE:

"PRODUCTION FACILITIES

"ALL BIDDERS MUST COMPLETE THE FOLLOWING:

"/A) BIDDERS MUST STIPULATE IN THEIR BID THE PLANTS WHERE THE WORK IS TO BE PERFORMED, THE EXACT STREET ADDRESS OR ADDRESSES THEREOF, AND THE NAME AND ADDRESS OR ADDRESSES OF THE OWNER AND OPERATOR IF OTHER THAN BIDDER. IF MORE THAN ONE PLANT IS SPECIFIED, INFORMATION MUST BE SUBMITTED AS TO THE AMOUNT AND EXTENT OF WORK WHICH IS TO BE DONE IN EACH PLANT LISTED. FAILURE TO FURNISH COMPLETE INFORMATION MAY BE THE CAUSE FOR REJECTION OF THE BID.

"/C) THE PERFORMANCE OF ANY OF THE WORK CONTRACTED FOR IN ANY PLACE OTHER THAN THAT NAMED IN THE BID IS PROHIBITED UNLESS THE SAME IS SPECIFICALLY APPROVED IN ADVANCE BY THE CONTRACTING OFFICER. IF THE CONTRACTING OFFICER APPROVES THE USE OF ANY ADDITIONAL PLANT OR FACTORY BY THE CONTRACTOR FOR PERFORMANCE OF THE WORK HEREUNDER, ANY INCREASED COSTS TO THE GOVERNMENT AS A RESULT THEREOF WILL BE CHARGED TO THE CONTRACTOR. FULL RESPONSIBILITY FOR FULFILLMENT OF THE CONTRACT WILL REMAIN WITH THE CONTRACTOR.'

LITE INDUSTRIES REPRESENTED ITSELF TO BE A SMALL BUSINESS CONCERN AND IN RESPONSE TO THE PRODUCTION FACILITIES CLAUSE, IT INDICATED ITS PLANT LOCATION AS PATERSON, NEW JERSEY. KINGS POINT ALSO REPRESENTED ITSELF AS SMALL BUSINESS, AND IT SPECIFIED FAYETTEVILLE, NORTH CAROLINA, AS ITS PLANT LOCATION.

ON MAY 3, 1961, AWARD WAS MADE TO LITE INDUSTRIES, INC., ON THE ADVERTISED PORTION OF THE INVITATION, FOR 965 UNITS AT $15.66 EACH (TOTAL AMOUNT OF $15,111.90).

BY TELEGRAM DATED MAY 2, 1961, LITE INDUSTRIES ADVISED THE RICHMOND DEPOT CONTRACTING OFFICE THAT IT WOULD MANUFACTURE AND SHIP THE LABOR SURPLUS SET ASIDE ITEMS FROM ITS PLANT AT LONG BRANCH, NEW JERSEY. AS PREVIOUSLY INDICATED, PATERSON, NEW JERSEY, IS IN AN AREA OF SUBSTANTIAL LABOR SURPLUS, WHILE FAYETTEVILLE, NORTH CAROLINA, AND LONG BRANCH, NEW JERSEY, ARE IN AREAS OF PERSISTENT LABOR SURPLUS.

BOTH LITE INDUSTRIES AND KINGS POINT ARE ELIGIBLE FOR NEGOTIATION FOR THE SET-ASIDE PORTION UNDER THIS INVITATION SINCE EACH HAS SUBMITTED A BID WITHIN 120 PERCENT OF THE HIGHEST AWARD PRICE ON THE UNRESTRICTED PORTION.

LITE OBSERVES THAT THE INVITATION DEFINES A "LABOR SURPLUS AREA" AS AN AREA WHICH "AT THE TIME OF AWARD" MEETS THE SPECIFIED CRITERIA, THAT THE "PRODUCTION FACILITIES" CLAUSE OF THE RICHMOND QUARTERMASTER INVITATION (INVITATION NO. QM/MGS/44-193-61-581) REQUIRES THAT PLACE OF PERFORMANCE BE INDICATED ONLY WITH REGARD TO THE ADVERTISED PORTION OF THE PROCUREMENT; AND THAT THE CLAUSE APPEARS TO MAKE ALLOWANCE FOR A CHANGE IN THE PLACE OF WORK BY THE CONTRACTOR UPON APPROVAL BY THE CONTRACTING OFFICER. LITE CONTENDS THAT IN VIEW OF THE FOREGOING LANGUAGE AND SINCE THE SET-ASIDE IS A NEGOTIATION, IT SHOULD BE PERMITTED TO INDICATE A PLACE OF PERFORMANCE FOR THE SET-ASIDE PORTION AFTER THE BID OPENING.

IT IS THE DECLARED POLICY OF THE DEFENSE ESTABLISHMENTS TO AID LABOR SURPLUS AREAS BY PLACING CONTRACTS WITH LABOR SURPLUS AREA CONCERNS AND BY ENCOURAGING PRIME CONTRACTORS TO PLACE SUBCONTRACTS WITH CONCERNS WHICH WILL PERFORM SUBSTANTIALLY IN LABOR SURPLUS AREAS. SEE SECTION 1-802, ARMED SERVICES PROCUREMENT REGULATION. PURSUANT THERETO, PREFERENCE FOR AWARDS IS GIVEN TO SUCH FIRMS (AND TO A LIMITED EXTENT TO SMALL BUSINESS CONCERNS) IN THE ORDER OF PRIORITY PREVIOUSLY ENUMERATED, UNDER A PARTIAL SET-ASIDE PROCEDURE. SEE SECTION 1, PART 8, ASPR.

LABOR SURPLUS AREA CONCERNS ARE DEFINED IN ASPR AS CONCERNS WHICH WILL PERFORM THE CONTRACT OR CAUSE IT TO BE PERFORMED SUBSTANTIALLY IN AREAS OF "SUBSTANTIAL" OR "SUBSTANTIAL AND PERSISTENT" LABOR SURPLUS. SPECIFICALLY, SECTION 1-801.1, ASPR PROVIDES THAT---

"A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN "AREAS OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS" IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS 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 SUBCONTRACTORS) IN SUCH AREAS OR IN "AREAS OF SUBSTANTIAL OR PERSISTENT LABOR SURPLUS" AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE.

"EXAMPLE A. ABC COMPANY, MANUFACTURING IN A FULL EMPLOYMENT AREA, BIDS ON A CONTRACT AT $1,000. ABC COMPANY WILL INCUR THE FOLLOWING COSTS:

DIRECT LABOR ----------------------------------------- $200

OVERHEAD --------------------------------------------- 200

PURCHASES OF MATERIALS FROM XYZ, WHICH MANUFACTURES

THE MATERIALS IN A LABOR SURPLUS AREA --------------- 510

"ABC COMPANY QUALIFIES AS A LABOR SURPLUS AREA CONCERN. EXAMPLE B. DEF COMPANY, MANUFACTURING IN A LABOR SURPLUS AREA, BIDS ON A CONTRACT AT $1,000. DEF COMPANY WILL INCUR THE FOLLOWING OSTS:

DIRECT LABOR ----------------------------------------- $200

OVERHEAD --------------------------------------------- 200

PURCHASE OF MATERIALS FROM UVW, WHICH IS LOCATED IN

A LABOR SURPLUS AREA BUT WHICH MERELY DISTRIBUTES

THE MATERIALS FROM STOCKS ON HAND (THE MATERIALS

HAVING BEEN MANUFACTURED BY UVW'S SUPPLIER) --------- 550

"DEF COMPANY DOES NOT QUALIFY AS A LABOR SURPLUS AREA CONCERN REGARDLESS OF WHETHER UVW'S SUPPLIER MANUFACTURES IN A LABOR SURPLUS AREA.

"EXAMPLE C. GHI COMPANY, MANUFACTURING IN A LABOR SURPLUS AREA, BIDS ON A CONTRACT AT $1,000. GHI COMPANY WILL INCUR THE FOLLOWING COSTS:

DIRECT LABOR ----------------------------------------- $230

OVERHEAD --------------------------------------------- 275

PURCHASE OF MATERIALS FROM RST, WHICH MANUFACTURES

THE MATERIALS IN A FULL EMPLOYMENT AREA ------------- 425

"GHI COMPANY QUALIFIES AS A LABOR SURPLUS AREA CONCERN.'

FROM THE ABOVE EXAMPLES IT APPEARS THAT THE PLACE AT WHICH THE CONTRACTOR WILL ITSELF PERFORM MAY BE WHOLLY IMMATERIAL IF MORE THAN 50 PERCENT OF THE TOTAL COST OF PERFORMANCE WILL BE INCURRED FOR SUBCONTRACTING OR PURCHASE OF MATERIALS OR COMPONENTS. THE LOCATION OR LOCATIONS OF THE SOURCES OF SUCH MATERIALS OR COMPONENTS WILL, UNDER THE REGULATION, DETERMINE THE STATUS OF THE PRIME CONTRACTOR AS A LABOR SURPLUS AREA CONCERN.

THESE INVITATIONS REQUIRED THAT BIDDERS STIPULATE IN THEIR BID THE PLANTS WHERE THE WORK IS TO BE PERFORMED AND THE EXTENT OF WORK WHICH IS TO BE DONE IN EACH PLANT LISTED. UNDER THE ASPR DEFINITION OF A CONCERN WHICH WILL PERFORM (EITHER BY ITSELF OR OTHERS), SUBSTANTIALLY ALL THE WORK (MORE THAN 50 PERCENT OF THE CONTRACT PRICE) IN A DISTRESSED LABOR AREA, COSTS OF PERFORMANCE INCLUDE THE AMOUNTS INCURRED "IN MANUFACTURING OR PRODUCTION.' ONE OF THE COSTS OF "PRODUCTION" IS THE COST OF PURCHASED MATERIALS, AND THE EXAMPLES GIVEN IN ASPR RECOGNIZE SUCH COSTS ALONE AS SUFFICIENT TO QUALIFY A FIRM OR DISQUALIFY IT AS A LABOR SURPLUS AREA CONCERN. THEREFORE, WHILE IT MAY BE DETERMINED FROM THE INVITATION CLAUSE THAT THE BIDDER WILL "PERFORM THE WORK" AT A CERTAIN PLANT, THAT INFORMATION IS NOT NECESSARILY DISPOSITIVE OF THE QUESTION WHETHER MORE THAN 50 PERCENT OF THE TOTAL COSTS OF MANUFACTURE AND PRODUCTION WILL BE INCURRED IN THAT AREA. WE ARE NOT ABLE TO DETERMINE ABSOLUTELY FROM THE INFORMATION REQUIRED BY THESE INVITATIONS WHETHER BIDDERS WOULD QUALIFY AS LABOR SURPLUS AREA CONCERNS AS DEFINED IN SECTION 1-801.1, ASPR. WE ARE OF THE VIEW THAT INVITATIONS INVOLVING LABOR SURPLUS SET-ASIDES SHOULD CONTAIN CLEAR STATEMENTS AS TO THE INFORMATION WHICH BIDDERS WILL BE REQUIRED TO FURNISH, THE SUPPORTING DATA, IF ANY, WHICH MAY BE REQUIRED, AND WHETHER ANY OR ALL OF SUCH INFORMATION MAY BE FURNISHED WITH THE INVITATION AND THE EFFECT OF FAILURE TO FURNISH IT.

UNDER THESE CIRCUMSTANCES, THE AWARD MADE HERE UNDER INVITATION FOR BIDS NO. QM/CTM/-36-243-61-718 WILL NOT BE QUESTIONED, WHETHER NEGOTIATED ON THE BASIS OF INFORMATION CONTAINED IN THE BIDS OR ON INFORMATION FURNISHED AFTER OPENING. AS TO FUTURE AWARDS, PENDING ISSUANCE OF MORE ADEQUATE FORMS AND INSTRUCTIONS, WE BELIEVE THAT NEGOTIATIONS FOR LABOR SURPLUS-SET -ASIDES OFFERED UNDER INVITATIONS CONTAINING NO MORE SPECIFIC REQUIREMENTS THAN THOSE HERE CONSIDERED SHOULD BE CONDUCTED ON THE BASIS OF FULL INFORMATION OBTAINED FROM ALL ELIGIBLE INTERESTED BIDDERS. SEE B-146258, AUGUST 28, 1961.