B-153662, JUL. 31, 1964

B-153662, JUL. 31, 1964

TO RMF, INC.:

REFERENCE IS MADE TO YOUR TELEGRAMS OF MARCH 5, AND 17, AND LETTERS OF MARCH 23, MAY 1, MAY 12, JULY 14 AND JULY 17, 1964, PROTESTING AGAINST THE AWARD OF A SET-ASIDE FOR LABOR SURPLUS AREA CONCERNS TO ANY OTHER BIDDER UNDER INVITATION FOR BIDS NO. 600-545-64 ISSUED BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., ON JANUARY 21, 1964.

THE INVITATION SOLICITED BIDS--- TO BE OPENED FEBRUARY 20, 1964--- FOR FURNISHING 1790 EACH NOSE SECTION CONTAINERS, WING AND CANARD CONTAINER SETS, AFT SECTION CONTAINERS, AND METAL PALLETS. THE INVITATION ALSO STATED THAT AN ADDITIONAL, EQUAL QUANTITY HAD BEEN SET ASIDE FOR AWARD TO A LABOR SURPLUS AREA CONCERN. WITH RESPECT THERETO THE FOLLOWING DEFINITIONS WERE CONTAINED THEREIN:

"1. "PERSISTENT LABOR SURPLUS AREA" MEANS AN AREA WHICH (A) IS CLASSIFIED BY THE DEPARTMENT OF LABOR AS AN "AREA OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS" (ALSO CALLED "AREA OF SUBSTANTIAL AND PERSISTENT UNEMPLOYMENT") AND IS LISTED AS SUCH BY THAT DEPARTMENT IN CONJUNCTION WITH ITS PUBLICATION "AREA LABOR MARKET TRENDS," OR (B) IS CERTIFIED AS AN AREA OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS BY THE DEPARTMENT OF LABOR PURSUANT TO A REQUEST BY A PROSPECTIVE CONTRACTOR.

"2. "SUBSTANTIAL LABOR SURPLUS AREA" MEANS AN AREA WHICH (A) IS CLASSIFIED BY THE DEPARTMENT OF LABOR AS AN "AREA OF SUBSTANTIAL LABOR SURPLUS" (ALSO CALLED "AREA OF SUBSTANTIAL NEMPLOYMENT") AND WHICH IS LISTED AS SUCH BY THAT DEPARTMENT IN CONJUNCTION WITH ITS PUBLICATION ,AREA LABOR MARKET TRENDS," OR (B) IS CERTIFIED AS AN AREA OF SUBSTANTIAL LABOR SURPLUS BY THE DEPARTMENT OF LABOR PURSUANT TO A REQUEST BY A PROSPECTIVE CONTRACTOR.

"/B) THE TERM "LABOR SURPLUS AREA CONCERN" INCLUDES PERSISTENT LABOR SURPLUS AREA CONCERNS AND SUBSTANTIAL LABOR SURPLUS AREA CONCERNS AS DEFINED BELOW:

"1. "PERSISTENT LABOR SURPLUS AREA CONCERN" MEANS A CONCERN THAT AGREES TO PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF A CONTRACT IN PERSISTENT LABOR SURPLUS AREAS. A CONCERN SHALL BE DEEMED TO PERFORM A SUBSTANTIAL PROPORTION OF A CONTRACT IN PERSISTENT LABOR SURPLUS AREAS IF THE COSTS THAT THE CONCERN WILL INCUR ON ACCOUNT OF MANUFACTURING OR PRODUCTION PERFORMED IN SUCH AREAS (BY ITSELF OR ITS FIRST-TIER SUBCONTRACTORS) AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE.

"2. "SUBSTANTIAL LABOR SURPLUS AREA CONCERN" MEANS A CONCERN THAT AGREES TO PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF A CONTRACT IN SUBSTANTIAL LABOR SURPLUS AREAS. A CONCERN SHALL BE DEEMED TO PERFORM A SUBSTANTIAL PROPORTION OF A CONTRACT IN SUBSTANTIAL LABOR SURPLUS AREAS IF THE COSTS THAT THE CONCERN WILL INCUR ON ACCOUNT OF MANUFACTURING OR PRODUCTION PERFORMED IN SUBSTANTIAL LABOR SURPLUS AREAS OR IN SUBSTANTIAL AND PERSISTENT LABOR SURPLUS AREAS (BY ITSELF OR ITS FIRST-TIER SUBCONTRACTORS) AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT CE.'

THE FOLLOWING PROVISIONS ALSO APPEARED IN THE INVITATION:

"AGREEMENT TO PERFORM AS A LABOR SURPLUS AREA CONCERN:

"/1) A BIDDER OR OFFEROR DESIRING TO BE CONSIDERED FOR AWARD AS A LABOR SURPLUS AREA CONCERN MUST (A) MAKE AN AFFIRMATIVE REPRESENTATION THAT HE IS A LABOR SURPLUS AREA CONCERN AND (B) IDENTIFY IN HIS BID, OR OFFER PRIOR TO THE TIME OF OPENING OF AWARD, THE GEOGRAPHICAL AREAS IN WHICH HE PROPOSES TO PERFORM OR CAUSE TO BE PERFORMED A SUBSTANTIAL PROPORTION OF THE PRODUCTION OF THE CONTRACT. IF THE DEPARTMENT OF LABOR CLASSIFICATION OF ANY SUCH AREA CHANGES AFTER THE BIDDER OR OFFEROR HAS SUBMITTED HIS BID OR OFFER, THE BIDDER OR OFFEROR MAY CHANGE THE AREAS IN WHICH HE PROPOSES TO PERFORM, PROVIDED THAT HE SO NOTIFIES THE CONTRACTING OFFICER BEFORE THE CONTRACT AWARD. ANY PREFERENCE FOR AWARD WILL BE BASED UPON THE LABOR SURPLUS CLASSIFICATION OF THE DESIGNATED PRODUCTION AREAS AS OF THE TIME OF THE PROPOSED AWARD.

"/2) THE BIDDER OR OFFEROR AGREES THAT IF AWARDED A CONTRACT FOR WHICH HE WOULD NOT HAVE QUALIFIED HAD HE NOT BEEN A PERSISTENT LABOR SURPLUS AREA CONCERN, HE WILL PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF THE PRODUCTION IN AREAS CLASSIFIED AT THE TIME OF AWARD OR AT THE TIME OF PERFORMANCE OF THE CONTRACT, AS PERSISTENT LABOR SURPLUS AREAS; FURTHER THAT IF AWARDED A CONTRACT AS A SUBSTANTIAL LABOR SURPLUS AREA CONCERN, HE WILL PERFORM OR CAUSE TO BE PERFORMED A SUBSTANTIAL PROPORTION OF THE PRODUCTION IN AREAS CLASSIFIED AT THE TIME OF AWARD OR AT THE TIME OF PERFORMANCE OF THE CONTRACT AS SUBSTANTIAL OR PERSISTENT LABOR SURPLUS AREAS.'

CLAUSE 6.10 OF THE INVITATION PROVIDED AS FOLLOWS:

"/A) GENERAL. A PORTION OF THIS PROCUREMENT, AS IDENTIFIED ELSEWHERE IN THE SCHEDULE, HAS BEEN SET ASIDE FOR AWARD ONLY TO ONE OR MORE LABOR SURPLUS AREA CONCERNS, AND TO A LIMITED EXTENT, TO SMALL BUSINESS CONCERNS WHICH DO NOT QUALIFY AS LABOR SURPLUS AREA CONCERNS. NEGOTIATIONS FOR AWARD OF THE SET-ASIDE PORTION WILL BE CONDUCTED ONLY WITH RESPONSIBLE LABOR SURPLUS AREA CONCERNS (AND SMALL BUSINESS CONCERNS TO THE EXTENT INDICATED BELOW) WHO HAVE SUBMITTED RESPONSIVE BIDS OR PROPOSALS ON THE NON-SET-ASIDE PORTION AT A UNIT PRICE NO GREATER THAN 120 PERCENT OF THE HIGHEST AWARD MADE ON THE NON SET-ASIDE PORTION. NEGOTIATIONS FOR THE SET -ASIDE PORTION WILL BE CONDUCTED WITH SUCH BIDDERS 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.

"WITHIN EACH OF THE ABOVE GROUPS, NEGOTIATIONS WITH SUCH CONCERNS WILL BE IN THE ORDER OF THEIR BIDS ON THE NON-SET-ASIDE PORTION BEGINNING THE LOWEST RESPONSIVE BID/PROPOSAL. THE SET-ASIDE PORTION SHALL BE AWARDED AT THE HIGHEST UNIT PRICE AWARDED ON THE NON-SET ASIDE PORTION, ADJUSTED TO REFLECT TRANSPORTATION AND OTHER COST FACTORS WHICH WERE CONSIDERED IN EVALUATING BIDS/PROPOSALS ON THE NON SET-ASIDE PORTION * * *.'

ON FEBRUARY 20, 1964, THE BIDS WERE OPENED AND TABULATED. REVIEW OF THE BIDS DISCLOSED THAT YOUR FIRM, RMF, INC., SUBMITTED THE LOWEST RESPONSIVE BID. AWARD OF THE NON-SET-ASIDE PORTION WAS SUBSEQUENTLY MADE TO YOU AT THE BID PRICE OF $219,454 F.O.B. ORIGIN.

WITH RESPECT TO THE SET-ASIDE PORTION OF THE PROCUREMENT, RMF REPRESENTED IN ITS BID THAT IT WAS A SMALL BUSINESS CONCERN; THAT IT WAS A SUBSTANTIAL LABOR SURPLUS AREA CONCERN; THAT THE LOCATION OF THE PLANT AT WHICH THE SUPPLIES WOULD BE MANUFACTURED WAS KING OF PRUSSIA, PENNSYLVANIA; AND THAT 100 PERCENT OF THE CONTRACT WOULD BE MANUFACTURED IN KING OF PRUSSIA, PENNSYLVANIA. KING OF PRUSSIA IS LOCATED IN A SUBSTANTIAL LABOR SURPLUS AREA. THE SECOND LOW BIDDER REPRESENTED THAT IT WAS A SMALL BUSINESS CONCERN AND THAT IT WAS A PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA CONCERN. HOWEVER, VERIFICATION OF THE AREAS IN WHICH ITS BID STATED THE WORK WOULD BE PERFORMED REVEALED THAT IT DID NOT QUALIFY AS A LABOR SURPLUS AREA CONCERN IN A PERSISTENT AREA. THE BID OF THE THIRD LOW BIDDER, FAB WELD CORPORATION, REPRESENTED THAT IT WAS A SMALL BUSINESS CONCERN; THAT IT WAS A PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA CONCERN; AND THAT 100 PERCENT OF THE CONTRACT PRICE WOULD BE MANUFACTURED IN SIMPSON (LACKAWANNA COUNTY), PENNSYLVANIA. SIMPSON IS LOCATED IN A PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREA.

SUBSEQUENT EVENTS, HOWEVER, HAVE INDICATED THAT WHILE YOU REPRESENTED THAT 100 PERCENT OF THE CONTRACT PRICE WOULD BE MANUFACTURED IN KING OF PRUSSIA, A SUBSTANTIAL LABOR SURPLUS AREA, IT NOW APPEARS THAT YOU WILL INCUR LABOR SURPLUS AREA COSTS OF $77,299.52 IN LOCATIONS OTHER THAN KING OF PRUSSIA. SUBSEQUENT EVENTS HAVE ALSO INDICATED THAT WHILE FAB-WELD REPRESENTED THAT 100 PERCENT OF THE CONTRACT PRICE WOULD BE MANUFACTURED IN SIMPSON, PENNSYLVANIA, A PERSISTENT LABOR SURPLUS AREA, IT NOW SUBMITS THAT IT WILL INCUR PERSISTENT LABOR AREA COSTS OF $37,120.40 IN LOCATIONS OTHER THAN SIMPSON. GIVING EFFECT TO THE CHARGES DISCUSSED ABOVE, RMF WOULD QUALIFY AS A SUBSTANTIAL LABOR SURPLUS AREA CONCERN AND FAB-WELD WOULD QUALIFY AS A PERSISTENT LABOR SURPLUS AREA CONCERN FOR PURPOSE OF THE SET-ASIDE UNDER CONSIDERATION, BECAUSE MORE THAN 50 PERCENT OF THE CONTRACT PRICE WOULD BE ATTRIBUTED TO COSTS INCURRED IN THE LABOR SURPLUS AREAS OF THE RESPECTIVE CLASSES INDICATED.

OF INTEREST HERE IS THE FURTHER FACT THAT UNDER THE FIRST COST BREAKDOWN AS TO AREAS SUBMITTED BY FAB-WELD AFTER THE BID OPENING, IT WOULD NOT HAVE QUALIFIED AS A PERSISTENT LABOR SURPLUS AREA CONCERN. HOWEVER, SUCH BREAKDOWN WAS LATER REVISED AS TO PROPOSED SUPPLIERS SO AS ULTIMATELY TO APPEAR TO QUALIFY FAB-WELD AS INDICATED ABOVE.

WE HAVE RECOGNIZED THAT IT MAY NOT ALWAYS BE POSSIBLE FOR A BIDDER TO FURNISH EVIDENCE WITH ITS BID, OR EVEN PRIOR TO AWARD, THAT IT HAD FIRM COMMITMENTS FROM SUPPLIERS IN LABOR SURPLUS AREAS TO QUALIFY FOR AWARD ON THIS BASIS. B-151804, DECEMBER 11, 1963. THE PRICE WHICH A BIDDER HAS TO MEET IN ORDER TO BE ENTITLED TO AWARD ON THE SET-ASIDE PORTION OF A PROCUREMENT IS NOT KNOWN BEFORE AWARD OF THE CONTRACT ON THE COMPETITIVE PORTION, AND THE BIDDER THEREFORE DOES NOT KNOW EXACTLY THE AMOUNT OF LABOR SURPLUS AREA PERFORMANCE COSTS IT WILL BE OBLIGED TO SHOW BEFORE IT IS ELIGIBLE FOR AWARD. IN ANY EVENT UNDER THE PROVISIONS OF THE INVITATION, THE SUCCESSFUL BIDDER AGREES ONLY THAT, IF IT IS AWARDED A CONTRACT AS A PERSISTENT OR SUBSTANTIAL LABOR SURPLUS AREA CONCERN, IT WILL PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF THE PRODUCTION IN AREAS CLASSIFIED AT TIME OF AWARD, OR AT TIME OF PERFORMANCE OF THE CONTRACT, AS PERSISTENT OR SUBSTANTIAL LABOR SURPLUS AREAS. THE PURPOSE FOR WHICH THE AWARD HAS BEEN LIMITED TO SURPLUS LABOR AREA CONCERNS WILL BE FULLY MET AS LONG AS THE CONTRACTOR ABIDES BY ITS AGREEMENT AND PERFORMS IN AN AREA FALLING IN THE SAME CATEGORY OF LABOR SURPLUS AS SHOWN IN ITS BID. B 153267, JUNE 8, 1964.

THEREFORE, SINCE BOTH RMF AND FAB-WELD DID NOT PURPORT TO CHANGE THE CATEGORIES OF LABOR SURPLUS AREAS WHERE THEY HAD REPRESENTED THEY WOULD PERFORM, WE PERCEIVE NO OBJECTION TO THEIR CHANGING THE SITES OF PERFORMANCE AFTER BID OPENING. UNDER SUCH CIRCUMSTANCES, FAB-WELD WHICH HAD REPRESENTED IT WOULD PERFORM IN A PERSISTENT LABOR SURPLUS AREA, WOULD APPEAR TO HAVE PRIORITY IN THE NEGOTIATION FOR THE SET ASIDE PORTION OF THE PROCUREMENT. HOWEVER, IN VIEW OF THE CIRCUMSTANCES OF THIS CASE, THE CONTRACTING OFFICER BEFORE PROCEEDING ON SUCH BASIS SHOULD VERIFY THAT THE SUPPLIERS SUBMITTED BY FAB-WELD IN ORDER TO QUALIFY AS A PERSISTENT LABOR SURPLUS AREA CONCERN ACTUALLY ARE MANUFACTURERS WITH FACTORIES LOCATED IN PERSISTENT LABOR SURPLUS AREAS AS REQUIRED BY ASPR 1-800. YOUR LETTER OF JULY 17, WHICH RAISES QUESTIONS IN THIS RESPECT, IS BEING REFERRED TO THE CONTRACTING OFFICER FOR CONSIDERATION IN THIS CONNECTION.