In re B. B. Saxon Company, Inc.

• Decision Date: 01 June 1978
• Docket Number: B-190505
• Citation: 57 Comp.Gen. 501
• Parties: IN THE MATTER OF B. B. SAXON COMPANY, INC.
• Court: Comptroller General of the United States

57 Comp.Gen. 501

IN THE MATTER OF B. B. SAXON COMPANY, INC.

No. B-190505

Comptroller General of the United States

June 1, 1978

Contracts - labor stipulations - service contract act of 1965 - applicability of act - contracting agency v. Labor department where department of labor (DOL) notifies agency that it has determined service contract act (SCA) is applicable to proposed contract, agency must comply with regulations implementing SCA unless dol's view is clearly contrary to Law. Since determination that SCA applies to contract for overhaul of aircraft engines is not clearly contrary to law solicitation which does not include required SCA provisions is defective and should be canceled. Contention that applicability of SCA should be determined by office of federal procurement policy (OFPP) does not justify agency's failure to comply with SCA under circumstances where OFPP has not taken substantive position on issue. Contracts - requirements - estimated amounts basis best information available use of estimated needs instead of precise actual needs is not objectionable where solicitation is for multi-year requirements contract and agency states it cannot determine its needs with precision but has based its estimates on best available information. Advertising - advertising v. Negotiation - negotiation propriety - small business concerns - set-asides even though small business set-aside procurement is technically a negotiated procurement, where contract is to be awarded solely on price mere fact that negotiations are desirable to enhance offeror understanding of complex procurement does not provide legal basis for use of negotiation procedures in lieu of small business restricted advertising, since record does not support agency assertion that specifications are not sufficiently definite to permit formal advertising. Contracts - requirements - multi-year procurement - cancellation ceiling - adjustment agency is not required to adjust cancellation ceiling in multi-year requirements contract after first year's estimated quantities are reduced even though such adjustments might result in lower overall prices. Contractors - incumbent - competitive advantage agency is not required to furnish production equipment to prospective offerors to overcome competitive advantage of incumbent which already owns necessary equipment, since government does not own such equipment and incumbent's competitive advantage results from its prior contracting activity and not through any action of the government. Contracts - negotiation - requests for proposals - inconsistent provisions - not established in record responsibility provisions in request for proposals (RFP) which require contractor to have certain personnel "on board" by time of award but also provide for contractor commitment to obtain personnel for contract performance do not conflict since latter provision refers to personnel other than those required to be "on board." Contracts - negotiation - requests for proposals - omissions - cost estimates - spare parts furnished by contractor agency is not required to furnish cost estimate of spare parts in RFP where such parts are to be principally furnished by the government and contractor will be reimbursed for contractor acquired parts on a normal billing cycle so that contractor investment is minimal. However, it is suggested that consideration be given to including such estimates in future solicitations. Contracts - negotiation - evaluation factors - cost, etc., of changing contractors use of evaluation factor to reflect cost of changing contractors is not improper even though such factor May penalize every offeror except the incumbent since government May legitimately take into account all tangible costs of making particular award.

B. B Saxon (saxon) protests request for proposals (RFP) f41608-77-r 8635 issued by the department of the air force kelly air force base, Texas. The solicitation is for a multi-year requirements contract for the repair, overhaul and modification of aircraft engines and repairable parts. Saxon asserts the following solicitation deficiencies as its bases for protest:

1. The exclusion of this procurement from the coverage of the service contract act;

2. The use of best estimated quantities (BEQ) instead of specified quantities for anticipated annual requirements;

3. The use of a negotiated procurement rather than a formally advertised procurement;

4. The failure to adjust the "cancellation ceiling" after the BEQ for the first year was reduced;

5. The failure of the government to furnish production equipment to assure that meaningful competition is obtained;

6. A conflict in the responsibility criteria relative to equipment and personnel;

7. The absence of a cost estimate for spare parts;

8. An evaluation method which is unfair to all offerors except the incumbent.

For the reasons set forth below, the protest is sustained on issues 1 and 3 and denied as to issues 2, 4, 5, 6, 7 and 8.

1. Service contract act

The RFP incorporated walsh-healey public contracts act provisions; it did not include service contract act (SCA), 41 U.S.C. 351 et seq. (1970) and Supp. V, 1975) provisions or an SCA wage determination, although it did include a clause entitled "potential application of the service contract act (fixed price)." Saxon argues that there is no justification for this procurement to be outside the scope of the SCA, while the air force maintains that the walsh-healey act, 41 U.S.C. 35 (1970), dealing with supplies, and not the SCA, applies to this procurement, because the contract is to be one for materials, supplies or equipment (overhauled aircraft engines) and not one for services. The department of labor (DOL), however, has informed the air force "that this type of contract has as its principal purpose the furnishing of services through the use of service employees and as such, is clearly subject to the service contract act."

The air force and DOL have previously disagreed over the applicability of the SCA to various air force contracts. For example, in 53 Comp.Gen. 412 (1973), we considered a case where the air force contracting officer believed the SCA was not applicable to a procurement for aircraft modification and depot maintenance, but DOL subsequently determined that the SCA was applicable. A similar situation, involving an air force procurement for aircraft engine overhaul and maintenance, was considered in curtiss-wright corporation v. Mclucas, 381 F.Supp. 657 (d.N.J. 1974).

In both curtiss-wright and 53 Comp.Gen. Supra, the air force acted in the belief that the procurements were subject to the provisions of the walsh-healey act rather than the SCA. As a consequence, it did not submit a notice of intention to make a service contract (standard form (SF) 98) to DOL. Under applicable regulations, contracting officers were required to file an SF 98 with DOL at least 30 days prior to the issuance of a solicitation leading to the award of a contract "which May be subject to the act." 29 CFR 4.4-4.6 (1976); armed services procurement regulation (ASPR) 12.1004, 12.1005 (1976 ed.). In response, DOL was to notify the agency of any minimum wage rate determination applicable to the contract, which thereafter was to be included in the solicitation and any resulting contract. ASPR 12 1005.3. It was concluded in both cases that the air force's failure to submit the SF 98 did not invalidate the contract because the air force had acted in good faith.

In the case before this office, we found that the regulations required the initial decision as to the applicability of the SCA to be made by the contracting agency, not DOL. Thus we stated:

If the agency does not believe a contract May be subject to the act * * * there is no duty on its part to submit anything to DOL or to include a service contract act clause in the solicitation. Accordingly, we think the only issue that must be determined is whether or not the air force contracting officer had a reasonable basis for believing that his procurement was not one that "May be subject to the act." 53 Comp.Gen. at 416.

We found that the air force, relying on what it regarded as a "significant amount of rebuilding or replacement of aircraft components called for by the contract specification, had) traditionally treated this type of contract, both before and after the enactment of the SCA, as subject to the walsh-healey act." We also found that the record reasonably supported the air force's assertions that it relied on several "judicial and DOL decisions, which appear to treat reasonably similar type of work as subject to the walsh-healey act, " as a basis for its failure to include SCA coverage in the solicitation and resulting contract.

We concluded that the contracting officer had acted in good faith, that there had not been "a deliberate, arbitrary attempt to circumvent any statutory or regulatory provision, " and that the contract had not been awarded illegally since "the validity of a service contract was not affected by the absence therefrom of a DOL wage determination when the absence was not DUE to 'any misfeasance or nonfeasance on the part of the contracting agency.'" we suggested, however, that consideration be given to the promulgation of a contract clause which would protect the workers concerned without disrupting the procurement process in circumstances where dol, after contract award, disagrees with the contracting agency determination of non-applicability of the SCA to the particular procurement. (the "potential application of the service contract act" clause, set forth in defense procurement circular 76-1 (ITEM xx11), and incorporated in the solicitation in this case, is a result of our suggestion.)

Similarly in curtiss-wright, the court held that the...