B-154443, JUN. 29, 1964

B-154443, JUN. 29, 1964

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO LETTER DATED JUNE 10, 1964, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY REQUESTING OUR OPINION IN DETERMINING THE PROCEDURE TO BE FOLLOWED BY THE GOVERNMENT IN THE SITUATION HEREINAFTER DESCRIBED.

ON MARCH 26, 1964, THE NATIONAL PARK SERVICE OF THE DEPARTMENT OF THE INTERIOR ADVERTISED AN INVITATION FOR BIDS (CONSTRUCTION CONTRACT, STANDARD FORM 20, JANUARY 1961 ED.) FOR CONSTRUCTION OF 9.331 MILES OF APPROACH ROAD, 22 MILES WEST OF KAYENTA, ARIZONA, AND EXTENDING NORTH TO NAVAJO NATIONAL MONUMENT, ALL IN NAVAJO COUNTY, ARIZONA.

ON FEBRUARY 26, 1964, PURSUANT TO THE DAVIS-BACON ACT, 40 U.S.C. 276A, THE BUREAU OF PUBLIC ROADS, DEPARTMENT OF COMMERCE, REQUESTED A WAGE DETERMINATION FROM THE DEPARTMENT OF LABOR FOR THE INVITATION IN QUESTION. ALTHOUGH 29 CFR 5.3 (A) (2) (II) SPECIFICALLY REQUIRES AN AGENCY IN MAKING SUCH A REQUEST TO FURNISH THE "LOCATION OF THE PROPOSED PROJECT (INCLUDING DISTANCE IN MILES AND DIRECTION FROM THE NEAREST POINT OF REFERENCE)," THE BUREAU OF PUBLIC ROADS STATED THE LOCATION OF THE PROJECT TO BE THE CITY OF "FLAGSTAFF.' ACTUALLY KAYENTA, ARIZONA, IS THE NEAREST POINT OF REFERENCE. THE CITY OF FLAGSTAFF IS 153 MILES FROM KAYENTA, WITH THE HOPI INDIAN RESERVATION INTERVENING. PURSUANT TO THE BUREAU'S REQUEST, THE SOLICITOR OF LABOR RENDERED DECISION NO. AC-24,308, DATED MARCH 20, 1964, WHICH ADVISED THAT THE WAGE RATES LISTED THEREIN WERE THE PREVAILING RATES OF WAGES FOR THE DESCRIBED CLASSES OF LABOR IN THE CITY OF FLAGSTAFF, STATE OF ARIZONA. SUCH DECISION WAS INCORPORATED IN THE INVITATION FOR BIDS.

BIDS WERE OPENED AT PHOENIX, ARIZONA, ON APRIL 16, 1964, AND OF THE FOUR BIDS RECEIVED THE BID OF JAMES HAMILTON CONSTRUCTION COMPANY OF GRANTS, NEW MEXICO, WAS LOW. ALL BIDS SUBMITTED WERE FROM OUT-OF STATE FIRMS. THE LOW BID WAS $832,499.11. THE NEXT LOW BID WAS $870,647.25.

ON MAY 5, 1964, THE GOVERNMENT NOTIFIED THE JAMES HAMILTON CONSTRUCTION COMPANY BY MAIL OF THE ACCEPTANCE OF ITS BID AND INSTRUCTED THE EXECUTION OF THE CONTRACT FORM AND REQUESTED SUBMISSION OF THE NECESSARY PAYMENT AND PERFORMANCE BONDS.

AS EXECUTED COPY OF THE CONTRACT, ACCOMPANIED BY THE NECESSARY BONDS IN THE REQUIRED AMOUNT AND OTHERWISE ACCEPTABLE, WAS RETURNED BY THE COMPANY TO THE GOVERNMENT FOR EXECUTION. THE CONTRACT DOCUMENTS HAVE NOT YET BEEN EXECUTED ON BEHALF OF THE GOVERNMENT.

BY LETTER DATED MAY 19, 1964, THE SOLICITOR OF LABOR NOTIFIED THE BUREAU OF PUBLIC ROADS AS FOLLOWS:

"DUE TO AN INADVERTENCE THE LOCATION OF THE WORK SHOULD HAVE ROAD "22 MILES WESTERLY OF AYENTA" RATHER THAN "FLAGSTAFF"AND THE RATES FOR THE CLASSIFICATIONS ON THE ATTACHED SCHEDULES SHOULD HAVE BEEN SPECIFIED.'

THE SOLICITOR ALSO REQUESTED THAT APPROPRIATE ACTION IN THAT CONNECTION BE TAKEN. IT APPEARS THAT THE NEW SCHEDULE OF RATES WHICH WERE ATTACHED TO THE LETTER INCREASES THE ORIGINAL HOURLY RATES BY AN AVERAGE OF SIXTY- TWO CENTS PER JOB CLASSIFICATION.

IT IS STATED THAT THE CONTRACTOR HAS REFUSED TO CONSIDER THE NEW WAGE RATES, AND REQUESTS PERMISSION TO PROCEED WITH THE WORK, SUGGESTING FUTURE EQUITABLE ADJUSTMENT.

THE ADMINISTRATIVE ASSISTANT SECRETARY SAYS THAT SINCE THE FISCAL YEAR ENDS JUNE 30, 1964, THE DELAYS AND EXTRA COSTS BELIEVED POSSIBLE IN READVERTISING AND RELETTING THE CONTRACT PLUS THE POSSIBLY HIGHER COSTS OF NEW BIDS WOULD CREATE A TREMENDOUS LOSS TO THE GOVERNMENT, AND FURTHER, PLACE FUNDING OF THE PROJECT IN ANOTHER FISCAL YEAR; AND THAT THE ALTERNATE TO REAFFIRMING THE CONTRACT, NAMELY, CANCELLATION AND READVERTISEMENT, AND THE ATTEMPT TO READJUST HIGHER WAGE RATES BY EQUITABLE ADJUSTMENT AREA BOTH FRAUGHT WITH THE ADDITIONAL COSTS OF LITIGATION FOR BREACH OF CONTRACT AND WOULD INCUR CONSIDERABLE DELAY.

IN VIEW THEREOF, HE URGES THAT WE CONSIDER RECOMMENDING THE REAFFIRMATION OF THE PRESENT CONTRACT.

THE DAVIS-BACON ACT IS MANDATORY IN ITS REQUIREMENT THAT THE ADVERTISED SPECIFICATION OF CONTRACTS COVERED THEREBY SHALL CONTAIN THE MINIMUM WAGES TO BE PAID VARIOUS CLASSES OF LABORERS AND MECHANICS BASED UPON THE WAGES DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING FOR THE CORRESPONDING CLASSES OF WORKMEN EMPLOYED ON PROJECTS OF A CHARACTER SIMILAR TO THE CONTRACT WORK IN THE CITY, TOWN, VILLAGE, OR OTHER CIVIL SUBDIVISION OF THE STATE, IN WHICH THE WORK IS TO BE PERFORMED AND THE ACT ADMITS OF NO ADMINISTRATIVE DISCRETION, 20 COMP. GEN. 890; CF. 23 ID. 262; 24 ID. 376.

IN THE INSTANT CASE, THE MINIMUM WAGE RATES CONTAINED IN THE CONTRACT ARE BASED ON THE WAGES DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING FOR THE AREA OF FLAGSTAFF. HOWEVER, THE PROJECT IS LOCATED IN THE AREA OF HAYENTA WHERE, ACCORDING TO THE SOLICITOR'S LETTER OF MAY 19, 1964, THE SCHEDULE OF WAGES DETERMINED TO BE PREVAILING FOR THE FLAGSTAFF AREA IS NOT FOR APPLICATION. THUS, THE MINIMUM WAGE RATES INCLUDED IN THE CONTRACT ARE NOT, IN FACT, BASED ON A DETERMINATION RELEVANT TO THE PROJECT IN QUESTION. UNDER THESE CIRCUMSTANCES, SINCE MINIMUM WAGES PRESCRIBED BY THE CONTRACT ARE NOT IN FACT BASED ON A DETERMINATION BY THE SECRETARY OF LABOR OF WAGES PREVAILING IN THE AREA WHERE THE WORK IS TO BE PERFORMED, IT IS OBVIOUS THAT THE INTENDMENT OF THE DAVIS-BACON ACT HAS NOT BEEN SATISFIED.

WHILE IT MAY BE ARGUED THAT THE CONTRACT AWARDED UNDER SUCH CIRCUMSTANCES IS NOT BINDING UPON THE GOVERNMENT, WE DO NOT BELIEVE THAT IT WOULD BE IN THE INTEREST OF THE GOVERNMENT IN THIS INSTANCE TO REPUDIATE IT. IN SIMILAR SITUATIONS, OUR OFFICE HAS NOT OBJECTED TO THE ISSUANCE OF CHANGE ORDERS TO INCORPORATE WITHIN THE CONTRACT PROPER WAGE RATES AND CONDITIONS. 20 COMP. GEN. 890; 37 COMP. GEN. 326. WHILE IT WAS HELD IN 40 COMP. GEN. 557 THAT THE MINIMUM WAGES FIXED BY A CONTRACT SHOULD NOT BE MODIFIED TO INCORPORATE DIFFERENT RATES DETERMINED AS THE RESULT OF A CHANGE OF JUDGMENT BY THE LABOR DEPARTMENT CONCERNING CLASSIFICATIONS OF WORK APPLICABLE TO THE PROJECT, THE CONTRACT RATES IN THAT CASE HAD BEEN BASED ON A PROPER DETERMINATION, AND WE DO NOT THINK THAT THE REASONS WHICH DICTATED THAT DECISION ARE APPLICABLE HERE. WE THEREFOR CONCLUDE THAT THE CORRECTED RATES SHOULD BE INCORPORATED IN THE SUBJECT CONTRACT EITHER BY SUPPLEMENTAL AGREEMENT OR BY CHANGE ORDER, WITH AN EQUITABLE ADJUSTMENT OF THE CONTRACT PRICE. IN DETERMINING THE AMOUNT OF SUCH ADJUSTMENT, IT SHOULD BE NOTED THAT A MINIMUM WAGE SCHEDULE IS NOT A REPRESENTATION THAT LABOR CAN BE OBTAINED AT SUCH RATES, AND THAT IT IS INCUMBENT ON EACH BIDDER FOR A GOVERNMENT CONTRACT TO BASE HIS BID ON HIS OWN INVESTIGATION AND ESTIMATE OF THE WAGES HE WILL HAVE TO PAY. FOR THESE REASONS, THE FACT THAT THE MINIMUM RATES OF WAGES INCORPORATED INTO THE CONTRACT ARE RAISED IN THE PROCESS OF AMENDMENT DOES NOT NECESSARILY MEAN THAT THE INCREASE IN THE COST OF PERFORMANCE IS TO BE MEASURED SOLELY BY THE DIFFERENCES BETWEEN THE MINIMUM WAGE RATES. INSTEAD, ANY PRICE ADJUSTMENT SHOULD BE BASED UPON DIFFERENCES BETWEEN THE NEW MINIMUM RATES AND THE RATES ACTUALLY USED BY THE CONTRACTOR IN COMPUTING HIS LABOR COST ESTIMATES ON WHICH HIS BID WAS BASED.