B-148512, JUNE 1, 1962, 41 COMP. GEN. 787

B-148512, JUNE 1, 1962, 41 COMP. GEN. 787

CONTRACTS - AWARDS - LABOR SURPLUS AREAS - PRICE DIFFERENTIALS A PROCUREMENT PROCEDURE WHICH PROVIDES THAT, AFTER SOLICITATION OF PROPOSALS FROM ALL PROSPECTIVE OFFERS REGARDLESS OF SIZE OR STATUS AS LABOR SURPLUS AREA CONCERNS, NEGOTIATIONS WILL BE CONDUCTED WITH ALL QUALIFIED FIRMS WITHIN A COMPETITIVE PRICE RANGE AND THE LABOR SURPLUS AREA FIRMS IN A PRESCRIBED ORDER OF PRIORITY WILL BE AFFORDED AN OPPORTUNITY TO MEET THE LOWEST EVALUATED PRICE BEFORE AWARD IS MADE TO AN OFFEROR NOT QUALIFIED AS A LABOR SURPLUS AREA CONCERN IS A PROCUREMENT PROCEDURE UNDER WHICH THE LOWEST PRICE IS OBTAINED THROUGH UNRESTRICTED SOLICITATION OF BIDS AND DOES NOT RESULT IN THE PAYMENT OF A PRICE DIFFERENTIAL TO RELIEVE AN AREA OF ECONOMIC DISLOCATION; THEREFORE, THE PROCEDURE IS NOT CONTRARY TO LAW, NOTWITHSTANDING THE POSSIBLE PREFERENCE TO LABOR SURPLUS AREA FIRMS.

TO SENTINEL ELECTRONICS, INCORPORATED, JUNE 1, 1962:

REFERENCE IS MADE TO A TELEGRAM DATED MARCH 28, 1962, FROM YOUR ATTORNEY, I. H. WACHTEL, PROTESTING ON YOUR BEHALF AGAINST THE ALLEGED RESTRICTIVE CONDITIONS OF REQUEST FOR PROPOSALS NO. SC-36-039-62-10863 C2, ISSUED BY THE UNITED STATES ARMY SIGNAL SUPPLY AGENCY AT PHILADELPHIA, PENNSYLVANIA. IT IS CONTENDED BY MR. WACHTEL THAT THE PROPOSED METHOD OF PROCUREMENT IS INVALID IN THAT IT PROVIDES FOR A SET ASIDE OF THE ENTIRE QUANTITY FOR LABOR SURPLUS AREA CONCERNS; THAT THE INVITATION FAILS TO RECOGNIZE THE PROCEDURE WHICH ESTABLISHED PRIORITIES FOR PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA FIRMS; AND, THAT THE AWARD OF A CONTRACT THEREUNDER WILL BE BASED UPON NEGOTIATION RATHER THAN SEALED COMPETITIVE BIDS, ALL IN CONTRAVENTION OF APPLICABLE LAW AND REGULATIONS.

THE SUBJECT SOLICITATION SOUGHT PROPOSALS ON THE FURNISHING OF "POWER SUPPLY PP-1104) ( (G" UNITS, IN QUANTITIES RANGING FROM 508 TO 2032, IN ACCORDANCE WITH THE DRAWINGS AND SPECIFICATIONS MADE A PART THEREOF. THE USE OF A REQUEST FOR PROPOSALS CONTEMPLATING, ULTIMATELY, THE NEGOTIATION OF A CONTRACT WITH THE SUCCESSFUL BIDDER, INSTEAD OF FOLLOWING COMPETITIVE BIDDING PROCEDURES, WAS SELECTED IN FURTHERANCE OF THE DEPARTMENT'S LABOR SURPLUS AREA PROGRAM WHICH WAS ADOPTED PURSUANT TO A DIRECTIVE BY THE PRESIDENT OF THE UNITED STATES CONCERNING ASSISTANCE TO BE AFFORDED LABOR DISTRESSED AREAS. THE DETAILS OF THE PROGRAM ARE SET FORTH IN A DIRECTIVE DATED OCTOBER 16, 1961, ISSUED BY THE DEPUTY CHIEF OF STAFF FOR LOGISTICS. PURSUANT THERETO, CERTAIN SELECTED PROCUREMENTS ARE ALLOTTED TO THAT PROGRAM WHEREBY REQUESTS FOR PROPOSALS ARE DISTRIBUTED TO ALL PROSPECTIVE OFFERORS REGARDLESS OF THEIR SIZE OR STATUS AS LABOR SURPLUS AREA CONCERNS. AFTER RECEIPT OF THE PROPOSALS NEGOTIATIONS ARE CONDUCTED WITH ALL QUALIFIED FIRMS WITHIN A COMPETITIVE PRICE RANGE. IN THE EVENT THE LOW OFFEROR DOES NOT AGREE TO PERFORM MORE THAN FIFTY PERCENT OF THE CONTRACT IN A LABOR SURPLUS AREA, NO AWARD IS MADE UNTIL AN OPPORTUNITY OF MEETING THE LOWEST EVALUATED PRICE IS GIVEN TO OTHER FIRMS SUBMITTING PRICES WITHIN 120 PERCENT OF THE LOW OFFEROR IN THE FOLLOWING ORDER OF PRIORITY; (1) SMALL BUSINESS FIRMS WHICH ALSO QUALIFY AS LABOR SURPLUS FIRMS, BEGINNING WITH THE LOWEST RESPONSIVE OFFEROR; (2) LARGE BUSINESS FIRMS WHICH QUALIFY AS LABOR DISTRESSED AREA FIRMS, BEGINNING WITH THE LOWEST RESPONSIVE OFFEROR. IF NONE SO CLASSIFIED AGREE TO MEET THE LOWEST EVALUATED PRICE, THEN AWARD WILL BE MADE TO THE LOW OFFEROR, IRRESPECTIVE OF ITS LABOR CLASSIFICATION. IF THE LOWEST PROPOSAL IS MADE BY A LABOR SURPLUS FIRM, AWARD WILL BE MADE DIRECTLY TO THAT FIRM UPON REPRESENTATION THAT OVER FIFTY PERCENT OF THE CONTRACT PRICE WILL BE PERFORMED IN LABOR SURPLUS AREAS.

PARAGRAPH 3-201.2 (B) OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES IN PERTINENT PART AS FOLLOWS:

FOR THE DURATION OF THE NATIONAL EMERGENCY DECLARED PURSUANT TO PRESIDENTIAL PROCLAMATION 2914, DATED DECEMBER 16, 1950, THE ASSISTANT SECRETARY OF DEFENSE ( INSTALLATION AND LOGISTICS) HAS DETERMINED THAT ONLY THE FOLLOWING PROCUREMENTS MAY BE MADE PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (A) (I):

(I) PROCUREMENTS MADE IN KEEPING WITH (A) LABOR SURPLUS SET-ASIDE PROGRAMS * * *.

IN THIS CASE IT IS REPORTED THAT 357 FIRMS WERE PRESOLICITED OF WHICH 108 FIRMS, PLUS 53 ADDITIONAL COMPANIES, REQUESTED COPIES OF THE SOLICITATION. OF THE 26 FIRMS SUBMITTING PROPOSALS, 8 WERE FROM LARGE BUSINESS AND 18 WERE FROM SMALL BUSINESS. THE LOWEST RESPONSIBLE OFFER, AFTER NEGOTIATIONS, WAS MADE BY A SMALL BUSINESS CONCERN WHICH AGREED TO PERFORM MORE THAN FIFTY PERCENT OF THE CONTRACT IN A LABOR SURPLUS AREA. UNDER THE CIRCUMSTANCES WE FEEL ASSURED THAT FULL AND FREE COMPETITION WAS ACCORDED THE ENTIRE INDUSTRY NOTWITHSTANDING THE FACT THAT UNDER NOTE 1 OF THE SOLICITATION ALL PROSPECTIVE SUPPLIERS WERE ON NOTICE THAT PREFERENCE WOULD BE GIVEN TO LABOR SURPLUS AREA FIRMS IN A MANNER CONSISTENT WITH THE FOREGOING DIRECTIVE.

THE INSTANT CASE MAY BE DISTINGUISHED FROM THE MATTER CONSIDERED BY US IN THE DECISION OF MARCH 3, 1961, 40 COMP. GEN. 489, WHEREIN IT WAS HELD THAT TOTAL SET-ASIDE FOR LABOR SURPLUS AREA FIRMS, BY EXCLUDING FROM BIDDING OR NEGOTIATION THOSE CONCERNS OTHERWISE SITUATED, WAS CONTRARY TO LAW. THE PRESENT PROCEDURE THE LOWEST PRICE OBTAINABLE IS ESTABLISHED THROUGH UNRESTRICTED SOLICITATION OF BIDS OR PROPOSALS AND, THEREFORE, NO PRICE DIFFERENTIAL IS PAID TO RELIEVE AN AREA OF ECONOMIC DISLOCATION.

IN VIEW OF THE FOREGOING WE DO NOT BELIEVE THAT THIS PROCEDURE, UNDER WHICH THE SUBJECT PROCUREMENT HAS BEEN CONDUCTED, IS CONTRARY TO LAW, NOTWITHSTANDING THE POSSIBLE PREFERENCE ACCORDED LABOR DISTRESSED AREA FIRMS THROUGH NEGOTIATION, IN THE ORDER OF THE PRIORITIES ESTABLISHED THEREBY. ACCORDINGLY, THE PROTEST SUBMITTED ON YOUR BEHALF BY COUNSEL MUST BE AND IS DENIED.