B-176218, JUL 21, 1972, 52 COMP GEN 40

B-176218, JUL 21, 1972, 52 COMP GEN 40

CONTRACTS - SUBCONTRACTS - BID SHOPPING - LISTING OF SUBCONTRACTORS - COMPLIANCE REQUIREMENT THE LOW BID FOR THE PERFORMANCE OF A BOILER REPLACEMENT AND FUEL CONVERSION PROJECT THAT FAILED TO LIST THE NAMES OF MANUFACTURERS OR FABRICATORS THAT WOULD PERFORM TWO CATEGORIES OF THE WORK OF THE PROJECT TO BE SUBCONTRACTED PROPERLY WAS REJECTED AS NONRESPONSIVE SINCE THE PRINCIPLES ENUNCIATED IN 49 COMP. GEN. 120 THAT THE SUBCONTRACTOR LISTING REQUIREMENT DOES NOT APPLY TO FIRMS ASSEMBLING OFF-THE-SHELF ITEMS DO NOT ENCOMPASS MANUFACTURERS OR FABRICATORS, WHO, ALTHOUGH USING OFF-THE-SHELF ITEMS, MUST CONFORM TO SPECIFICATIONS, AS THE PURPOSE OF THE LISTING REQUIREMENT IS TO DISCOURAGE BID SHOPPING AND ENCOURAGE COMPETITION AMONG CONSTRUCTION SUBCONTRACTORS. THEREFORE, AS OTHER BIDS RECEIVED WERE UNREASONABLY PRICED, THE DISCARDING OF ALL BIDS AND THE USE OF NEGOTIATION PROCEDURES TO ACCOMPLISH THE PROJECT WERE IN ACCORDANCE WITH 41 U.S.C. 252(C)(14). BIDS - PRICES - REDUCTION PROPRIETY - REDUCTION AFTER CANCELLATION OF INVITATION A PRICE REDUCTION FROM THE SECOND LOW BIDDER AFTER THE DISCARDING OF BIDS, BECAUSE THE LOW BID WAS NONRESPONSIVE AND THE REMAINING BIDS RECEIVED WERE UNREASONABLE AS TO PRICE, WAS PROPERLY REJECTED SINCE A BID DETERMINED TO BE UNREASONABLY HIGH CANNOT BE SAID TO BE THAT OF THE "OTHERWISE SUCCESSFUL" BIDDER WHO PURSUANT TO SECTION 1-2.305 OF THE FEDERAL PROCUREMENT REGULATIONS IS ENTITLED VOLUNTARILY TO REDUCE ITS BID AFTER BID OPENING. THEREFORE, THE DECISION TO CANCEL THE INVITATION FOR BIDS AND RESOLICIT THE PROCUREMENT UNDER 41 U.S.C. 252(C)(14), WHICH PERMITS THE USE OF NEGOTIATION PROCEDURES WHERE BID PRICES AFTER ADVERTISING ARE UNREASONABLE, WAS A PROPER DETERMINATION.

TO THE ACTING ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JULY 21, 1972:

WE REFER TO A SUPPLEMENTAL REPORT DATED JULY 7, 1972, AND AN INITIAL REPORT OF JUNE 27, 1972, FROM YOUR GENERAL COUNSEL, ON THE PROTEST OF W.G. CORNELL CO. OF WASHINGTON, INC., AND JOHN C. GRIMBERG COMPANY, INC., A JOINT VENTURE (CORNELL-GRIMBERG), AGAINST THE AWARD OF A CONTRACT TO THE LIMBACH COMPANY (LIMBACH) UNDER AN INVITATION FOR BIDS (IFB) COVERING PROJECT NO. 08001/08002, FOR BOILER REPLACEMENT AND FUEL CONVERSION AT THE CENTRAL AND WEST HEATING PLANTS, WASHINGTON, D.C. ALSO, YOUR GENERAL COUNSEL DISCUSSED THE PROTEST OF LIMBACH AGAINST AN AWARD TO CORNELL- GRIMBERG AND THE FAILURE TO MAKE AN AWARD TO LIMBACH UNDER THE IFB.

CORNELL-GRIMBERG, THE SECOND LOW BIDDER, WITH A BASE BID OF $14,700,000, PROTESTED AGAINST AN AWARD TO LIMBACH, THE LOW BIDDER, WITH A BASE BID OF $13,890,000, ALLEGING THAT ITS BID IS NONRESPONSIVE TO THE LISTING OF SUBCONTRACTORS REQUIREMENTS OF THE IFB. YOUR GENERAL COUNSEL REPORTS THAT, SUBSEQUENT TO A REVIEW OF, AND AGREEMENT WITH, THE ALLEGATIONS OF CORNELL-GRIMBERG, THE CONTRACTING OFFICER REJECTED THE LIMBACH BID AS NONRESPONSIVE. IN ADDITION, THE CONTRACTING OFFICER REJECTED THE LIMBACH BIDS OF CORNELL-GRIMBERG AND NORAIR ENGINEERING CORP. AS UNREASONABLE AS TO PRICE. ALL BIDDERS WERE NOTIFIED OF THE CONTRACTING OFFICER'S DETERMINATION AND OF THE INTENTION TO NEGOTIATE A CONTRACT PURSUANT TO THE AUTHORITY IN 41 U.S.C. 252(C)(14), PERMITTING THE USE OF NEGOTIATION PROCEDURES WHERE BID PRICES AFTER ADVERTISING ARE NOT REASONABLE.

IN THE INITIAL REPORT ON THE CORNELL-GRIMBERG PROTEST, YOUR GENERAL COUNSEL ADVISED THAT, UPON FURTHER CONSIDERATION, THE CONTRACTING OFFICER BELIEVED THAT THE LIMBACH BID WAS RESPONSIVE. HOWEVER, THE SUPPLEMENTAL REPORT, BASED ON ADDITIONAL REVIEW AND ANALYSIS, TAKES THE POSITION THAT THE INITIAL REPORT WAS IN ERROR AND THAT THE LIMBACH BID IS, IN FACT, NONRESPONSIVE. MOREOVER, THE CONTRACTING OFFICER REFUSES TO ACCEPT A UNILATERAL BID PRICE REDUCTION OF $500,000 TENDERED BY CORNELL-GRIMBERG APPROXIMATELY 1 WEEK AFTER BID OPENING. THEREFORE, THE CONTRACTING OFFICER LIFTED THE SUSPENSION OF THE RECEIPT OF OFFERS UNDER THE NEGOTIATED RESOLICITATION AND SET A CLOSING DATE OF JULY 11, 1972.

THE IFB CONTAINED THE STANDARD GSA LISTING OF SUBCONTRACTORS CLAUSE WHICH PROVIDES FOR THE LISTING OF SUBCONTRACTORS BY BIDDERS FOR VARIOUS SPECIFIED CATEGORIES OF WORK, TWO OF WHICH WERE "FLUE-GAS DUST COLLECTION (SYSTEM)" AND "CONTROL SYSTEMS." THE IFB SPECIFICATIONS DISCLOSE THAT THE MAJOR PORTION OF THE FLUE-GAS DUST COLLECTION SYSTEM INVOLVES THE FURNISHING OF AN ELECTROSTATIC PRECIPITATOR BY A PRECIPITATOR MANUFACTURER. SIMILARLY, THE CONTROL SYSTEMS PORTION OF THE SPECIFICATIONS PROVIDES THAT ALL CONTROL EQUIPMENT SHALL BE PROVIDED AS A SYSTEM BY A SINGLE EXPERIENCED MANUFACTURER. TO FULFILL THE WORK REQUIREMENTS OF THE FLUE-GAS DUST COLLECTION SYSTEM, LIMBACH LISTED ITSELF ON THE SUBCONTRACTORS LISTING FORM AND ALSO AN ELECTRICAL FIRM. FURTHER, LIMBACH LISTED ITSELF FOR THE CONTROL SYSTEMS PORTION. LIMBACH DID NOT LIST AS SUBCONTRACTORS THE MANUFACTURERS OR FABRICATORS OF EITHER THE PRECIPITATOR OR CONTROL SYSTEMS. BOTH CORNELL-GRIMBERG AND NORAIR LISTED MANUFACTURERS OR FABRICATORS FOR THE TWO CATEGORIES.

YOUR GENERAL COUNSEL'S PRESENT POSITION, AS SUBSCRIBED TO BY COUNSEL FOR CORNELL-GRIMBERG, POINTS TO THIS FAILURE TO LIST THE RESPECTIVE MANUFACTURERS OR FABRICATORS FOR THE TWO CATEGORIES TO JUSTIFY THE NONRESPONSIVENESS OF THE LIMBACH BID. HE INVITES OUR ATTENTION TO THOSE PORTIONS OF THE SUBCONTRACTORS LISTING CLAUSE WHICH WARN BIDDERS THAT THE FAILURE TO LIST SUBCONTRACTORS FOR EVERY CATEGORY, OR PORTION THEREOF, AS APPLICABLE, WILL RESULT IN THE REJECTION OF THE BID AS NONRESPONSIVE. ADDITION, HE RELIES, IN SUPPORT OF HIS POSITION, ON THE FOLLOWING EXCERPT FROM THE CLAUSE:

THE TERM "SUBCONTRACTOR" FOR THE PURPOSE OF THIS REQUIREMENT SHALL MEAN THE INDIVIDUAL OR FIRM WITH WHOM THE BIDDER PROPOSES TO ENTER INTO A SUBCONTRACT FOR MANUFACTURING, FABRICATING, INSTALLING, OR OTHERWISE PERFORMING WORK UNDER THIS CONTRACT PURSUANT TO THE PROJECT SPECIFICATIONS APPLICABLE TO ANY CATEGORY INCLUDED ON THE LIST.

THE DECISION IN 49 COMP. GEN. 120, AT PAGE 123(1969), CONSTRUED THE EFFECT OF LANGUAGE IDENTICAL TO THAT QUOTED ABOVE, AS FOLLOWS:

*** WE ARE OF THE VIEW THAT SUCH LANGUAGE WAS INTENDED TO ENCOMPASS ONLY THOSE MANUFACTURERS AND FABRICATORS WHOSE PRODUCTS ARE SPECIALLY MADE TO CONFORM WITH PARTICULAR IFB SPECIFICATIONS, AND NOT TO FIRMS SUCH AS THOSE UNDER CONSIDERATION HERE WHO MERELY ASSEMBLE OFF-THE SHELF ITEMS.***

WITH THAT DECISION IN MIND, YOUR GENERAL COUNSEL RATIONALIZES THE BASIS FOR HIS CONCLUSION, AS FOLLOWS:

THERE IS, TO OUR KNOWLEDGE, NO DISPUTE AS TO THE FACT THAT THE SUCCESSFUL BIDDER WILL HAVE TO SUBCONTRACT OUT THE MANUFACTURING OR FABRICATING OF THE CONTROL SYSTEM AND THE PRECIPITATOR, AND THAT THE HOLDER OF THESE SUBCONTRACTS MUST PERFORM WORK UNDER THIS CONTRACT (AT LEASE SUPERVISION) AT THE SITE. IT IS APPARENT THEREFORE, THAT UNDER THE LITERAL WORDING OF (THE ABOVE-QUOTED PARAGRAPH) *** SUCH MANUFACTURERS WOULD BE A "SUBCONTRACTOR" REQUIRED TO BE LISTED. THE SOLE QUESTION IS WHETHER THE PRINCIPLES ENUNCIATED IN 49 COMP. GEN. 120 ARE SUFFICIENTLY BROAD TO EXCLUDE FROM THE DEFINITION OF SUBCONTRACTOR THE MANUFACTURERS OF THE CONTROL SYSTEM AND THE PRECIPITATOR.

THE BASIS FOR THE DETERMINATION THAT THE MANUFACTURERS AND/OR FABRICATORS ARE SUBCONTRACTORS AND CONSEQUENTLY MUST BE INCLUDED IN THE LISTINGS IN QUESTION IS THAT (1) ALTHOUGH THE COMPONENTS INCLUDED ARE SUBSTANTIALLY "OFF-THE-SHELF" ITEMS, THE SYSTEMS MUST BE SPECIALLY MANUFACTURED OR FABRICATED PURSUANT TO THE PROJECT SPECIFICATIONS, AND SOME MAJOR COMPONENTS OF THE PRECIPITATOR MUST BE SPECIALLY FABRICATED FOR THE PURPOSE OF THIS CONTRACT, AND (2) THE MANUFACTURERS OF BOTH THE CONTROL AND PRECIPITATOR SYSTEMS ARE REQUIRED TO PERFORM WORK AT THE SITE, SUCH AS SUPERVISION OF INSTALLATON, TESTING OF OPERATION, AND INSTRUCTION IN USE.

*** EVEN ASSUMING THAT NINETY PER CENT OF THE COST OF THE COMPONENTS OF THE PRECIPITATOR CATEGORY ARE OFF-THE-SHELF ITEMS, IT IS OUR POSITION THAT THE DEGREE OF DESIGN AND ENGINEERING REQUIRED, THE CRITICAL IMPORTANCE OF THE TEN PER CENT SPECIFICALLY FABRICATED COMPONENTS, AND THE ON-SITE DUTIES OF THE MANUFACTURERS REQUIRE THE MANUFACTURERS TO BE TREATED AS SUBCONTRACTORS RATHER THAN MERE SUPPLIERS.

WE CONCLUDE, AFTER REVIEW OF THE ENTIRE RECORD AS SUPPLEMENTED BY CONFERENCES WITH THE INTERESTED PARTIES, THAT THE FAILURE OF LIMBACH TO LIST THE RESPECTIVE MANUFACTURERS INVOLVED IN THE PERFORMANCE OF THE TWO CATEGORIES IN QUESTION RENDERED ITS BID NONRESPONSIVE. IN SO CONCLUDING, WE SUBSCRIBE TO THE ABOVE-QUOTED POSITION OF YOUR GENERAL COUNSEL THAT BIDDERS WERE REQUIRED TO LIST SUBCONTRACTORS WHO WOULD SPECIALLY FABRICATE SIGNIFICANT PORTIONS OF THE PRECIPITATOR AND WHO WOULD PERFORM SUBSTANTIAL ON-THE-SITE WORK RELATING TO THE PRECIPITATOR AND THE CONTROL SYSTEM.

WE BELIEVE YOUR GENERAL COUNSEL'S POSITION IS A REASONABLE INTERPRETATION OF THE CONTRACT DOCUMENTS, BUT WE ALSO UNDERSTAND THE UNDERLYING CONSIDERATIONS WHICH PROMPTED LIMBACH TO COMPLETE THE SUBCONTRACTOR LISTING FORM IN THE MANNER EVIDENCED BY ITS BID. HOWEVER, IN OUR OPINION, THE LISTING FORM, WHILE LACKING A DEGREE OF SPECIFICITY, AFFORDED ADEQUATE INFORMATION, WHEN READ IN THE LIGHT OF THE IFB SPECIFICATIONS, TO PERMIT A BIDDER TO PROPERLY COMPLETE THE FORM.

WITH RESPECT TO THE PROPRIETY OF THE PBS REFUSAL TO ACCEPT THE CORNELL- GRIMBERG PRICE REDUCTION, THE RECORD REVEALS THAT THE CONTRACTING OFFICER HAD REJECTED ALL BIDS, INCLUDING THE CORNELL GRIMBERG BID, AS UNREASONABLE AS TO PRICE BEFORE RECEIPT OF THE PRICE REDUCTION. THEREFORE, WE HAVE NO BASIS UPON WHICH TO OBJECT TO SUCH REFUSAL SINCE A BID DETERMINED TO BE UNREASONABLY HIGH CANNOT BE SAID TO BE THAT OF THE "OTHERWISE SUCCESSFUL" BIDDER WHO IS ENTITLED VOLUNTARILY TO REDUCE ITS BID AFTER OPENING. THIS IS THE CONTEXT OF SECTION 1-2.305 OF THE FEDERAL PROCUREMENT REGULATIONS. MOREOVER, THE RECORD SHOWS THAT CORNELL-GRIMBERG, ALTHOUGH IT HAD RECEIVED NO OFFICIAL COMMUNICATION OF THE REJECTION BEFORE OFFER OF THE REDUCTION, WAS AWARE OF THE CONTEMPLATED ACTION TO REJECT ON THE BASIS OF PRICE UNREASONABLENESS. SEE B-167299, AUGUST 11, 1969; AND B-157055, FEBRUARY 17, 1967.

THEREFORE, WE CONCUR WITH THE DECISION TO CANCEL THE IFB AND TO RESOLICIT THE PROCUREMENT UNDER NEGOTIATION PROCEDURES.