B-163026, MAY 22, 1968, 47 COMP. GEN. 666

B-163026, MAY 22, 1968, 47 COMP. GEN. 666

CONTRACTS - LABOR STIPULATIONS - NONDISCRIMINATION - "AFFIRMATIVE ACTION PROGRAMS" AN INVITATION THAT WITHOUT FURNISHING DETAILS REQUIRE BIDDERS TO SUBMIT AN ACCEPTABLE ,AFFIRMATIVE ACTION PROGRAM" TO ASSURE COMPLIANCE WITH THE EQUAL EMPLOYMENT OPPORTUNITY PROGRAM IS DEFECTIVE, AS INVITATIONS ARE DESIGNED TO SECURE FIRM BID COMMITMENTS UPON WHICH AN AWARD CAN BE MADE AND ARE NOT INTENDED AS A FIRST STEP FOR SUBSEQUENT NEGOTIATION PROCEDURE, AND, THEREFORE, SUCH AN INVITATION IS INCOMPATIBLE WITH 23 U.S.C. 112 PRESCRIBING COMPETITIVE BIDDING FOR FEDERALLY ASSISTED HIGHWAY CONSTRUCTION, AND SIMILAR STATUTORY PROVISIONS. CONTRACTS - LABOR STIPULATIONS - NONDISCRIMINATION - "AFFIRMATIVE ACTION PROGRAMS" TO COMPLY WITH COMPETITIVE BIDDING STATUTES, A PROPOSED ORDER BY THE OFFICE OF FEDERAL CONTRACT COMPLIANCE, DEPARTMENT OF LABOR, TO REQUIRE CONTRACTORS AND SUBCONTRACTORS TO SUBMIT BEFORE CONTRACT AWARD AN ACCEPTABLE "AFFIRMATIVE ACTION PROGRAM" FOR COMPLIANCE WITH THE EQUAL EMPLOYMENT OPPORTUNITY CONDITIONS OF EXECUTIVE ORDER NO. 11246 OF SEPTEMBER 24, 1965, UNDER INVITATIONS THAT DO NOT OUTLINE THE DETAILS OF AN ACCEPTABLE ACTION PROGRAM, SHOULD BE IMPLEMENTED BY REGULATIONS DEFINING THE MINIMUM REQUIREMENTS TO BE MET BY A BIDDER'S PROGRAM, AND ANY OTHER STANDARDS OR CRITERIA BY WHICH THE ACCEPTABILITY OF THE PROGRAM WILL BE JUDGED.

TO REPRESENTATIVE WILLIAM C. CRAMER, MAY 22, 1968:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 8, 1968, WITH ENCLOSURE, CONCERNING REQUIREMENTS FOR ACCEPTABLE "AFFIRMATIVE ACTION PROGRAMS" FOR COMPLIANCE WITH THE EQUAL EMPLOYMENT OPPORTUNITY CONDITIONS OF EXECUTIVE ORDER NO. 11246 OF SEPTEMBER 24, 1965. YOU ENCLOSE A COPY OF A DRAFT MEMORANDUM OF A PROPOSED ORDER WHICH WAS SUBMITTED FOR COMMENT TO THE HEADS OF ALL AGENCIES BY THE DIRECTOR, OFFICE OF FEDERAL CONTRACT COMPLIANCE (OFCC), DEPARTMENT OF LABOR.

WE UNDERSTAND YOUR REQUEST FOR OUR OPINION IS CONFINED TO THE PROPRIETY OF THE PROPOSED REQUIREMENTS, PARTICULARLY WITH REFERENCE TO THE FEDERAL- AID HIGHWAY PROGRAM, IN VIEW OF THE SPECIFIC PROVISION OF 23 U.S.C. 112 THAT SUCH HIGHWAY PROJECTS SHALL BE PERFORMED BY CONTRACTS AWARDED BY COMPETITIVE BIDDING, AND THAT YOU DO NOT QUESTION GENERALLY THE LEGALITY OF THE REQUIREMENT FOR THE INCLUSION OF NONDISCRIMINATION CLAUSES, WHICH WAS FIRST IMPOSED AS TO GOVERNMENT CONTRACTS BY EXECUTIVE ORDER NO. 8802, JUNE 25, 1941, AND EXTENDED TO CONSTRUCTION CONTRACTS UNDER FEDERALLY AIDED OR FINANCED PROGRAMS BY EXECUTIVE ORDER NO. 1114, JUNE 22, 1963.

YOU STATE THAT THE PROCEDURES PROPOSED BY THE DEPARTMENT OF LABOR CONTEMPLATE THAT THE LOW BIDDER AND ITS SUBCONTRACTORS, ON CONTRACTS COVERED BY THE ORDER, WILL BE REQUIRED TO SUBMIT BEFORE AWARD ACCEPTABLE AFFIRMATIVE ACTION PROGRAMS TO ASSURE EQUAL EMPLOYMENT OPPORTUNITIES, BUT THAT THE INVITATION FOR BIDS APPARENTLY WOULD NOT INCLUDE A STATEMENT OUTLINING THE DETAILS OF AN ACCEPTABLE PROGRAM. FURTHER, THAT WHEN AN UNACCEPTABLE PROGRAM IS SUBMITTED AWARD WILL NOT BE MADE UNTIL AGREEMENT IS REACHED ON AN ACCEPTABLE PROGRAM. YOU SAY THAT SINCE BIDDERS WILL NOT KNOW WHAT WILL CONSTITUTE AN ACCEPTABLE PROGRAM THEY WILL NOT BE ABLE TO MAKE A REASONABLE ESTIMATE OF THE PROBABLE COST OF THE PROGRAM, AND THUS MUST RUN THE RISK OF ADDED COSTS, INCLUDING POSSIBLE ADDITIONAL SUBCONTRACTING COSTS, WHEN THE PROPOSED SUBCONTRACTORS DO NOT SUBMIT ACCEPTABLE ACTION PROGRAMS. YOU ALSO POINT OUT THAT A LOW BIDDER HAS THE OPPORTUNITY TO AVOID ENTERING INTO A CONTRACT BY FAILING OR REFUSING TO SUBMIT AN ACCEPTABLE ACTION PROGRAM. FINALLY, YOU STATE THAT YOU BELIEVE IMPOSITION OF THE PROPOSED PROCEDURES WILL CAUSE ADDED DELAY AND COST TO THE FEDERAL-AID HIGHWAY PROGRAM.

THE PURPOSE AND BACKGROUND FOR THE PROPOSED ORDER IS STATED THEREIN AS FOLLOWS: 1. PURPOSE

THIS ORDER IS TO INSURE THAT BEFORE CONTRACTS ARE AWARDED, FEDERALLY INVOLVED CONSTRUCTION CONTRACTORS PROVIDE AFFIRMATIVE ACTION PROGRAMS WHICH COMPLY WITH THE REQUIREMENTS OF EXECUTIVE ORDER 11246 AND WITH RULES AND REGULATIONS ISSUED PURSUANT TO IT. 2. BACKGROUND

FOR OVER ONE AND A HALF YEARS, ACCEPTABLE AFFIRMATIVE ACTION PROGRAMS HAVE BEEN REQUIRED BEFORE CONTRACT AWARD BY A NUMBER OF FEDERAL CONTRACTING AND ADMINISTERING AGENCIES. DETAILED PRE-AWARD PROGRAMS ARE NOW REQUIRED BY THIS OFFICE IN THREE SPECIFIC GEOGRAPHICAL AREAS (ST. LOUIS, SAN FRANCISCO BAY, AND CLEVELAND) FOR ALL FEDERAL CONTRACTING AND ADMINISTERING AGENCIES. EXPERIENCE HAS SHOWN THAT SUCH PROCEDURES ARE CONSIDERABLY MORE EFFECTIVE IN IMPLEMENTING THE EXECUTIVE ORDER THAN EXCLUSIVELY POST-AWARD APPROACHES. THE PRE-AWARD REQUIREMENT FOR NONCONSTRUCTION CONTRACTS HAS BEEN IN EFFECT SINCE MAY 3, 1966.

THE FOLLOWING PERTINENT PROVISIONS OF THE PROPOSED ORDER ARE SET FORTH UNDER PARAGRAPH 3B:

ON ALL PROJECTS FOR FEDERAL OR FEDERALLY ASSISTED CONSTRUCTION, IN WHICH THE TOTAL CONSTRUCTION COST MAY BE ONE MILLION DOLLARS OR MORE:

(1) EACH AGENCY SHALL INCLUDE, OR REQUIRE THE APPLICANT TO INCLUDE, IN THE SPECIFICATIONS FOR EACH FORMALLY ADVERTISED CONSTRUCTION CONTRACT, A NOTICE (THE FORM OF WHICH IS APPROVED BY THE OFFICE OF FEDERAL CONTRACT COMPLIANCE) TO ALL PROSPECTIVE BIDDERS STATING THAT, IF ITS BID IS ONE MILLION DOLLARS OR MORE, THE LOW BIDDER MUST SUBMIT, IN WRITING, (AN) ACCEPTABLE AFFIRMATIVE ACTION PROGRAM/S) WHICH WILL HAVE THE RESULT OF ASSURING EQUAL EMPLOYMENT OPPORTUNITY IN ALL TRADES AND PARTICULARLY THE BETTER-PAID TRADES (SUCH AS ELECTRICIANS, PLUMBERS, PIPEFITTERS, SHEET METAL WORKERS, IRONWORKERS AND OPERATING ENGINEERS) TO BE USED ON THE JOB AND IN ALL PHASES OF THE WORK, WHETHER OR NOT THE WORK IS TO BE SUBCONTRACTED.

(2) BEFORE EACH CONTRACT IS AWARDED, THE CONTRACTING OR ADMINISTERING AGENCY SHALL MAKE AN EVALUATION OF THE PROPOSED AFFIRMATIVE ACTION PROGRAMS SUBMITTED WITH THE BID. THE EVALUATION SHALL BE CONDUCTED BY QUALIFIED SPECIALISTS REGULARLY INVOLVED IN EQUAL EMPLOYMENT OPPORTUNITY PROGRAMS, IN COOPERATION WITH THE OFCC AREA COORDINATOR IF ONE SERVES THE AREA WHERE THE CONTRACT WILL BE PERFORMED. UNDER PARAGRAPH 3C EACH FEDERAL CONTRACTING AND ADMINISTERING AGENCY IS REQUIRED TO SUBMIT TO THE OFCC ITS PROGRAM TO IMPLEMENT THE ORDER.

EXISTING REGULATIONS ISSUED BY THE SECRETARY OF LABOR PURSUANT TO THE AUTHORITY OF THE EXECUTIVE ORDER, WHICH APPEAR IN TITLE 41, CHAPTER 60, OF THE CODE OF FEDERAL REGULATIONS, REQUIRE THAT FEDERALLY ASSISTED CONSTRUCTION CONTRACTS SHALL INCLUDE A CLAUSE UNDER WHICH THE CONTRACTOR AND SUBCONTRACTORS AGREE TO TAKE VARIOUS AFFIRMATIVE ACTIONS TO ENSURE THAT APPLICANTS ARE EMPLOYED, AND THAT EMPLOYEES ARE TREATED DURING EMPLOYMENT, WITHOUT REGARD TO THEIR RACE, CREED, COLOR, OR NATIONAL ORIGIN. 41 CFR 60-1.3 (B). A PROPOSED REVISION OF 41 CFR CH. 60 ISSUED BY THE OFFICE OF FEDERAL CONTRACT COMPLIANCE PURSUANT TO EXECUTIVE ORDER NO. 11246, WAS PUBLISHED IN THE FEDERAL REGISTER, VOL. 33, NO. 32, ON FEBRUARY 15, 1968. REQUIREMENTS FOR A SIMILAR CLAUSE IN FEDERALLY ASSISTED CONSTRUCTION CONTRACTS AND SUBCONTRACTS ARE STATED UNDER SECTION 60-1.4 (B) OF THE PROPOSED REVISION, AND GENERAL REQUIREMENTS OF SATISFACTORY AFFIRMATIVE ACTION PROGRAMS ARE SET FORTH IN SUBPART C THEREOF. OTHER THAN THE SUBMISSION OF AN AFFIRMATIVE ACTION PROGRAM PRIOR TO AWARD, AND THE REQUIREMENT FOR APPROVAL THEREOF BY OFCC PRIOR TO AWARD, WE DO NOT FIND A SUBSTANTIAL BASIS ON WHICH TO CONCLUDE THAT THE PROPOSED ORDER CONTEMPLATES THAT THE AFFIRMATIVE ACTIONS REQUIRED OF CONTRACTORS AND SUBCONTRACTORS UNDER FEDERALLY ASSISTED CONSTRUCTION CONTRACTS WILL BE MATERIALLY DIFFERENT FROM THOSE WHICH HAVE BEEN REQUIRED OF SUCH PARTIES AFTER AWARD FOR SEVERAL YEARS.

A REVIEW OF THE RECORDS OF THIS OFFICE DOES NOT SHOW RECEIPT OF ANY CASES INVOLVING UNDUE RESTRICTIONS ON COMPETITION RESULTING FROM THE REQUIREMENT FOR AFFIRMATIVE ACTIONS BY CONTRACTORS TO ENSURE COMPLIANCE WITH THE EQUAL EMPLOYMENT OPPORTUNITY PROGRAM IN FEDERALLY ASSISTED CONSTRUCTION CONTRACTS, OR INVOLVING CONTRACTORS HAVING ENCOUNTERED SUBSTANTIALLY HIGHER COSTS IN SATISFACTORILY COMPLYING WITH EQUAL OPPORTUNITY REQUIREMENTS THAN WERE ANTICIPATED IN THE PREPARATION OF THEIR BIDS. IS FURTHER NOTED THAT, IN THE BACKGROUND INFORMATION QUOTED ABOVE, IT IS STATED THAT PREAWARD ACCEPTABLE AFFIRMATIVE ACTION PROGRAMS HAVE BEEN REQUIRED BY A NUMBER OF FEDERAL PROCUREMENT AGENCIES FOR OVER 2 YEARS, AND OUR RECORDS FAIL TO SHOW ANY CASES PRESENTED TO THIS OFFICE WHEREIN AWARD WAS NOT MADE TO THE LOW BIDDER BECAUSE OF HIS FAILURE OR REFUSAL TO SUBMIT AN ACCEPTABLE AFFIRMATIVE ACTION PROGRAM, OR INVOLVING CLAIMS FOR UNANTICIPATED COSTS RESULTING FROM SUCH A PROGRAM.

WHILE, AS NOTED ABOVE, PROBLEMS IN THE EXISTING PREAWARD ACCEPTABLE AFFIRMATIVE ACTION PROGRAM HAVE NOT BEEN REFLECTED IN OUR CONTRACT WORK, STATEMENTS CONTAINED IN RECORDS OF YOUR OFFICE WHICH YOU HAVE MADE AVAILABLE FOR EXAMINATION BY REPRESENTATIVES OF THIS OFFICE REFLECT THAT ROAD CONTRACTORS MAY BE ENCOUNTERING SERIOUS PROBLEMS IN CONNECTION WITH THE PREAWARD PROGRAM AS IT IS BEING ADMINISTERED IN THE GEOGRAPHICAL AREAS MENTIONED IN THE PROPOSED ORDER. SUCH STATEMENTS INDICATE THAT THE PREAWARD PROCEDURES HAVE IN SOME INSTANCES RESULTED IN EXTENDED PERIODS OF DELAY IN THE AWARDING OF CONTRACTS; THAT BIDDERS ARE FURNISHED INADEQUATE GUIDELINES FOR THE DEVELOPMENT OF AN ACCEPTABLE AFFIRMATIVE ACTION PROGRAM, AND THE LOW RESPONSIVE (AND OTHERWISE RESPONSIBLE) BIDDER MAY THEREFORE BE REQUIRED TO ENTER INTO NEGOTIATION PROCEDURES ON AN ACCEPTABLE PROGRAM IN ORDER TO OBTAIN THE AWARD; THAT A PROGRAM WHICH IS ACCEPTABLE ON ONE CONTRACT MAY NOT BE ACCEPTABLE ON ANOTHER; THAT A PROGRAM WHICH IS ACCEPTABLE AT THE TIME THE CONTRACT IS AWARDED MAY BE UNACCEPTABLE WHEN THE PROJECT IS HALF COMPLETED; AND THAT A BIDDER OPERATING UNDER NEGOTIATED LABOR AGREEMENTS WOULD IN SOME CASES BE REQUIRED TO VIOLATE THOSE AGREEMENTS IN ORDER TO COMPLY WITH THE PROPOSED ORDER.

STATUTORY PROVISIONS, SUCH AS THAT CONTAINED IN 23 U.S.C. 112, FOR COMPETITIVE BIDDING IN THE AWARD OF CONTRACTS HAVE BEEN INTERPRETED TO REQUIRE AWARD AFTER ADVERTISING TO THE LOWEST RESPONSIBLE BIDDER WHOSE BID IS RESPONSIVE TO THE TERMS OF THE INVITATION, AND IT IS ELEMENTARY THAT BIDDERS MUST BE ADEQUATELY ADVISED BEFOREHAND OF ALL MATERIAL REQUIREMENTS WHICH WILL AFFECT THEIR COSTS OR ABILITY TO PERFORM. INVITATIONS FOR BIDS WERE DESIGNED TO SECURE A FIRM COMMITMENT UPON WHICH AWARD COULD BE MADE FOR SECURING THE GOVERNMENT'S REQUIREMENTS DESCRIBED THEREIN, AND NOT AS A FIRST STEP FOR SUBSEQUENT NEGOTIATION PROCEDURES. IN VIEW THEREOF, THERE WOULD APPEAR TO BE A TECHNICAL DEFECT IN AN INVITATION'S REQUIREMENT FOR SUBMISSION OF A PROGRAM SUBJECT TO GOVERNMENT APPROVAL PRIOR TO CONTRACT AWARD WHICH DOES NOT INCLUDE OR INCORPORATE DEFINITE STANDARDS ON WHICH APPROVAL OR DISAPPROVAL WILL BE BASED. WE BELIEVE THAT THE BASIC PRINCIPLES OF COMPETITIVE BIDDING REQUIRE THAT BIDDERS BE ASSURED THAT AWARD WILL BE MADE ONLY ON THE BASIS OF THE LOW RESPONSIVE BID SUBMITTED BY A BIDDER MEETING ESTABLISHED CRITERIA OF RESPONSIBILITY, INCLUDING ANY ADDITIONAL SPECIFIC AND DEFINITE REQUIREMENTS SET FORTH IN THE INVITATION, AND THAT AWARD WILL NOT THEREAFTER BE DEPENDENT UPON THE LOW BIDDER'S ABILITY TO SUCCESSFULLY NEGOTIATE MATTERS MENTIONED ONLY VAGUELY BEFORE THE BIDDING. WE ARE THEREFORE ADVISING THE SECRETARY OF LABOR THAT IF THE PROPOSED ORDER IS ADOPTED IT SHOULD BE APPROPRIATELY IMPLEMENTED, BEFORE BECOMING EFFECTIVE, BY REGULATIONS WHICH SHOULD INCLUDE A STATEMENT OF DEFINITE MINIMUM REQUIREMENTS TO BE MET BY THE BIDDER'S PROGRAM, AND ANY OTHER STANDARDS OR CRITERIA BY WHICH THE ACCEPTABILITY OF SUCH PROGRAM WILL BE JUDGED.

AS TO ANY ADDED DELAY OR COST TO THE FEDERAL-AID HIGHWAY PROGRAM WHICH MIGHT BE OCCASIONED BY THE REQUIREMENT FOR ACCEPTABLE AFFIRMATIVE ACTION PROGRAMS BY CONTRACTORS AND SUBCONTRACTORS, SUCH FACTORS WOULD NOT NEGATE THE APPARENT LEGALITY OF THE REQUIREMENT. AS INDICATED ABOVE, ONE OF THE BASIC REQUISITES IN AWARDING CONTRACTS PURSUANT TO COMPETITIVE BIDDING IS THAT AWARD BE MADE TO A RESPONSIBLE BIDDER, AND ADDED DELAY AND COST IN DETERMINING THE RESPONSIBILITY OR ACCEPTABILITY OF THE LOW RESPONSIVE BIDDER ARE MATTERS COMMONLY ASSOCIATED WITH THE AWARDING OF SUCH CONTRACTS.

ALTHOUGH, AS YOU STATE, IMPOSITION OF THE PROCEDURES PROPOSED BY THE OFFICE OF FEDERAL CONTRACT COMPLIANCE WILL NO DOUBT CREATE OTHER LEGAL AND PRACTICAL PROBLEMS, WE BELIEVE THAT MANY AREAS OF SUCH CONTEMPLATED PROBLEMS MAY BE SUBJECT TO RESOLUTION OR DISPOSITION BY REGULATIONS PROMULGATED BY THE OFFICE OF FEDERAL CONTRACT COMPLIANCE OR BY IMPLEMENTING REGULATIONS OF THE AGENCIES AS PROVIDED FOR IN THE PROPOSED ORDER. IN ANY EVENT, WE CANNOT CONCLUDE AT THIS TIME THAT THE PROPOSED REQUIREMENT FOR SUBMISSION OF ACCEPTABLE AFFIRMATIVE ACTION PROGRAMS PRIOR TO AWARDING FEDERALLY ASSISTED CONSTRUCTION CONTRACTS IS AS A MATTER OF LAW CLEARLY INCOMPATIBLE WITH COMPETITIVE BIDDING REQUIREMENTS OF 23 U.S.C. 112, AND THEREFORE ILLEGAL, PROVIDED THE IMPLEMENTING REGULATIONS DISCUSSED ABOVE ARE ISSUED BEFORE THE PROPOSED ORDER ESTABLISHING SUCH REQUIREMENT BECOMES EFFECTIVE.

WE TRUST THIS SERVES THE PURPOSE OF YOUR LETTER OF APRIL 8. PLEASE LET US KNOW IF WE CAN BE OF ANY FURTHER ASSISTANCE IN THIS MATTER.