manufacturer in order to protect the taxpayer by buying directly from the source without paying unnecessary surcharges imposed by a dealer. The scantiness of procurement descriptions apparent in recent military, V. A. and GSA brand name or equal solicitations for furniture is ample proof that the ordinary manufacturer and specifically a small business manufacturing concern is stymied in submitting a responsive and responsible bid. How can such a small business concern and, for that matter any other competing manufacturer, bid on a brand unknown to them without being properly educated as to the exact construction features? To top off the unjust discrimination of manufacturers forced to bid on a competitive design, GSA has, in several instances, demanded that the furniture pieces to be offered, must be a comparable "commercially available item" of the bidder. The majority of successful government contractors,having supplied heretofore in a capable and satisfactory manner furniture, tailor-made to government specifications, are thus prevented from bidding since ordinarily they do not happen to have a comparable commercially available item in their line of production. Another point should be observed which is incidental to the issue at hand and operates to the detriment of the public at large: Most of the late procurements issued by the military, V. A. and GSA call for rather fancy and expensive brands of furniture, not ordinarily purchased by the average taxpayer intended primarily for officer quarters and loung ing and reception areas. Why is it necessary to use this type of plush furniture, such as Herman Miller, Metropolitan, Kittinger, Knoll International, Vecta, Nemschoff and others for which the Government must pay premium prices in excess of the prices paid previously by GSA for the standard office and lounging furniture which was quite adequate and served its purpose? How can such an extravagant practice be condoned and how is it compatible with President Reagan's hard-fought aim to cut expenses to the bone? When, in recent times, the Government adopted a policy to purchase commercially available commodities by foregoing government specifications whenever possible, it was not envisaged that, in the absence of ready and suitable Commercial Item Descriptions (CID), the alternate, otherwise permissible formula of "brand name or equal" would prove to be a wholly inadequate and unfair form of bidding on furniture requirements. The partiality shown to the manufacturers whose brand name is specified is obvious, not only because of the restrictive features of the current specifications, as shown above, but worse is that the Government assumes the role of an accomplice by encouraging bidders to copy or imitate the style and design of the named manufacturer and to infringe, for all intents and purposes, on his trademark. In Government procurements, the named manufacturer may welcome or even is responsible for having his brand specified, because he has from the outset an edge on his competitor. Under other circumstances he may not be so prone to permit an infringement of his trademark. One should recall that Courts have punished in numerous cases willful trademark violations and acts of unfair competition by awarding triple damages. All in all, the advertisement of "brand name or equal" of furniture requirements is highly unethical and injects an unwholesome spirit into the normal practice of fair trading, thus opening the door to piracy at its worst. To that end, appropriate legislative and/or administrative steps should be taken to bar altogether the practice of soliciting bids on furniture by using the formula "brand name or equal. " THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA E.W. MCKENZIE, Treasurer June 5, 1981 The Honorable John C. Danforth Chairman Subcommittee on Federal Expenditures, Research and Rules Washington, D. C. 20510 Dear Mr. Chairman: The Associated General Contractors of America (AGC) and its 113 chapters nationwide are comprised of approximately 30,000 firms, including more than 8,500 of the nation's leading general contracting companies that perform more than $100 billion of construction annually. AGC's members also perform approximately 50 percent of the contract construction by American firms in more than 100 countries abroad. More than 95 percent of AGC's member firms are small businesses, as defined by the Small Business Administration's size standards for general construction con tractors. AGC most appreciates your letter of May 19, 1981, inviting us to submit comments for inclusion in the record of the Subcommittee's May 15 hearing on the current state of the federal procurement system. You have requested a brief statement identifying the problems in the procurement system which are of particular concern to the members of AGC. Should the Subcommittee decide to conduct future hearings which focus on any of the issues addressed in our comments, we would request an opportunity to present more detailed testimony at that time. General Comments The federal construction procurement system, for well over 100 years, has served the nation and the taxpaying public well. It has done so primarily because of its emphasis on free and open THE FULL SERVICE CONSTRUCTION ASSOCIATION FOR FULL SERVICE MEMBERS 81-896 0-81--10 competition with a single contract award to the lowest responsible bidder. This procedure has assured intense competition within the construction industry, and has assured that the federal construction project will be completed at the most economical cost to the taxpayer. Yet, despite the historical success of the open competitive bid system with single contract award to the lowest responsible bidder, we have seen, throughout the years, attempts to tinker with this proven method; attempts to apply procurement techniques that may be appropriate in other, less competitive industries, to construction procurement. While these so-called "innovative" methods have never proven successful in construction procurement, the attempts to force their application seem never ending. The most recent of such attempts is embodied in the effort to apply the Office of Management and Budget Circular A-109, The Major Systems Acquisition Regulation, to construction procurement. The Circular provides for the use of "functional specifications" in procurement of larger projects, with the federal contract awarding agency using subjective evaluations to select one proposal among many different ones submitted as solutions to a vaguely defined procurement need. While such a practice might be workable in the procurement of major hardware systems, its application to construction procurement would place undue emphasis on, and give advantage to, construction firms with developer or consortium capabilities--characteristics not generally found in the average small business construction firm. It would also do so at the expense, and perhaps complete elimination, of the open competitive bid system in federal construction procurement. So too, there have been attempts through the years to experiment with multiple federal contract awards in lieu of a single contract system. Under the construction contracting system that has developed in the United States and many other countries through the years, the overall single contract for a construction project has been the preferred method. Under this system, the general contractor is responsible to the owner for completion of the entire project, and for every phase of the project, whether a particular part of the work is done by his own forces or by those of a subcontractor. Long experience has demonstrated that maximum efficiency, and lowest cost, in the construction of a project results when undivided responsibility for its execution is placed through the award of a single contract for the entire project. Yet, periodic attempts are made to experiment with a multiple contract system, which does not provide for coordination or undivided responsibility for the execution of the entire project. AGC recommends that any revisions to the procurement statutes include a stated preference for open competition with award of a single contract to the lowest responsible bidder in construction procurement. Reliance on the Private Sector The practice of performing public construction work with government employees and equipment is unsound, wasteful and counter to the best interests of the taxpaying public. In contrast to the contract method, construction by government forces does not provide adequate safeguards for public expenditures because accurate and comprehensive cost records are seldom kept, and are not open to public inspection. Independent research and cost studies indicate construction by contract is less expensive and more efficient. Historically, the Federal Government has acknowledged the problems of government agencies performing construction work with their own employees and has relied on contracting with private firms to accomplish the work. This reliance on the private sector is clearly federal policy. It has been specifically legislatively expressed as regards construction under the Federal-Aid Highway Act (23 U.S.C. 112(a) and construction of the Economic Development Administration's public work projects (92 U.S.C. 6705 (e)(i). In addition, OMB Circular A-76 (Policies for Acquiring Commerical or Industrial Products and Services Needed by the Government), which establishes the policies and procedures used to determine whether needed commercial or industrial type work should be done by contract with private sources or in-house using government facilities and personnel, states "In a democratic free enterprise economic system, the government should not compete with its citizens. The private enterprise system, characterized by individual freedom and initiatives is the primary source of national economic strength. In recognition of this principle, it has been and continues to be the general policy of the government to rely on competitive private enterprise to supply the products and services it needs," and "The government's business is not to be in business. Where private services are available, they should be looked to first to provide the commerical or industrial goods and services needed by the government to act on the public's behalf." Although AGC is not certain that all agencies covered by OMB Circular A-76 are, in fact, adhering to the requirements of the Circular, the very existence of the Circular, at least affords the private sector the opportunity to challenge an agency determination to perform work in-house (section II (appeals) of OMB Circular A-76). |