cordance with this subpart, must be rejected by the contracting officer. (See 41 CFR 50-201.101(a)(3)(i).)

(3) The provisions of 41 CFR 50201.1 require that the representations and stipulations prescribed in section 1 of the Act must be included in invitations to bid and in contracts subject to the Act, either in full or by incorporation by reference. Since no qualifications may be placed on the required representations and stipulations, any bid which seeks to avoid full compliance with the Act by any qualification or reservation must be rejected. (See 16 Comp. Gen. 593.)

(b) The responsibility for applying the stated eligibility requirements in order to determine whether or not a bidder is qualified as a manufacturer or regular dealer before award rests in the first instance with the contracting agency pursuant to authority delegated by the Secretary of Labor in accordance with section 4 of the Act (Circular Letter 8-61), as detailed in § 50-201.101(b) of Part 50-201 of this chapter. It is the obligation of the contracting agencies to obtain and consider all factual evidence essential to eligibility determinations for all bidders in line for award of contracts subject to the Act.

§ 50-206.51 Manufacturer.

(a)(1) Section 50-201.101(a)(1) of Regulations 41 CFR Part 50-201, defines a manufacturer as a "person who owns, operates, or maintains a factory or establishment that produces on the premises the materials, supplies, articles, or equipment required under the contract and of the general character described by the specifications."

(2) Generally, there should be no question as to a bidder's eligibility. The bidder either has, or has not, the requisite plant, equipment and personnel to produce on its own premises the goods called for under the Government contract.

(b) A bidder who desires to qualify for an award as a manufacturer must show before the award that it is (1) an established manufacturer of the particular good or goods of the general character sought by the Government (i.e., that the bidder has a plant, equipment and personnel to manufac

ture on its own premises the goods called for under the contract) or (2) if the bidder is “newly entering" into such manufacturing activity that the bidder has made all necessary prior arrangements and definite commitments for (i) manufacturing space, (ii) equipment, and (iii) personnel to perform on its own premises the manufacturing operations required for the fulfillment of the contract. A new firm which, prior to the award of a contract, has made such definite prior arrangements and commitments in order to enter a manufacturing business which will qualify it should not be barred from receiving the award because it has not yet done any manufacturing, even if such arrangement and commitments are contingent upon the award of a Goverment contract. However, in order to meet the "definite commitment" test for "newly entering" firms, the bidder must have entered into written, legally binding arrangements and commitments prior to, even though contingent upon, award, under which the bidder would acquire for itself plant, equipment and personnel if awarded the Government contract. This would be evidence of a bona fide intent to establish a continuing manufacturing entity and, as such, to become an eligible manufacturer. This requirement is intended to exclude from eligibility bidders who make unsubstantiated assertions that they are eligible and then totally subcontract or broker the contract after award.

(c)(1) In general, such “newly entering" firm must show that the manufacturing activity in question is not one which has been set up solely to produce on a Government contract and whose operations will be terminated upon completion of that contract. In effect, the firm must have established arrangements on a continuing basis for production of the goods desired by the Government.

(2) The documentation required to evidence prior arrangements and definite commitments will vary depending upon the facts and circumstances of the particular case. The contents and bona fides of all documentation and arrangements must be examined to determine if the spirit and intent of the

Act and the regulations have been met. The following are examples of what the Department of Labor considers as sufficient evidence of all necessary prior arrangements and definite commitments:

Manufacturing

(i) space can be either owned or leased by and in the name of the bidder. A recorded deed to the bidder's property in which the manufacturing is to take place, or a copy of a properly executed bona fide lease agreement clearly identifying the manufacturing space and setting forth the terms and conditions of the lease, would generally be considered evidence of prior arrangements and definite commitments for space. In addition, as noted above, any such lease agreement must be legally binding on the part of both parties to the agreement, the space must be for the exclusive and unrestricted use of the lessee, and the term of the lease must be of sufficient duration so that the bidder will be able to clearly fulfill the contract before the lease expires.

(ii)(A) The bidder must own or have made written, legally binding definite commitments to purchase or lease sufficient equipment to manufacture the goods, materials, or articles required for contract fulfillment. A bidder must have full, complete and unrestricted control of the necessary equipment. A bill of sale or a purchase order may evidence definite commitments for equipment. The general requirements with respect to a bill of sale or purchase order are that it be dated and signed by the bidder, specifically identifying and describing the equipment and the terms of payment for the equipment purchased or to be purchased, and containing the date by which the vendor delivered or is required to deliver the equipment.

(B) The vendor must provide written evidence of acceptance, such as a bill or invoice, acknowledging receipt of the purchase order, as written, and setting forth the terms of payment in accordance with prevailing business practice. Such documentation is normally associated with the consummation of a sale in the usual conduct of business transactions.

(C) Letters of intent for space and equipment or vendor quotations or

offers to sell or lease space or equipment, or affidavit that a sale or conveyance has occurred, do not constitute legally binding contractual agreements or definite commitments.

(iii) The best evidence of available personnel is the presence on the payroll of the manufacturing employees necessary to fulfill the contract. However, affirmative evidence which the bidder submits showing what prior arrangements and definite commitments it has made to hire its own manufacturing personnel will be considered.

(d) A bidder's mere representation or affirmation that he is a qualified manufacturer or has fulfilled the above applicable conditions is insufficient. Evidence must be presented to the contracting agency which shows that these conditions are, in fact, met prior to any award of a contract subject to the Act. If it is discovered after an award that the bidder did not act in good faith by actually fulfilling these acquisition requirements, such contract award shall, in accordance with § 50-201.101(a)(3)(i)(A) immediately upon such discovery, be subject to termination by the contracting officer.

(e) The plain language of the Act and regulations makes it clear that covered contracts are to be awarded only to contractors who are currently capable of manufacturing on their premises the goods called for under the contract or who, if newly entering into manufacturing, have made binding commitments before award to enable them to produce such goods as discussed above. Thus, a bidder's arrangements to use, rent, or share the equipment, personnel, or space of another legal entity on a time and material or "as needed" basis do not constitute the making of all necessary prior arrangements or definite commitments, (See "In re Metalcraft Mfg. Sale Corp.", 15 WH Cases 557, 566 (1962).) The Department has consistently held that the availability of the manufacturing and producing establishments of others does not qualify the contractor as a manufacturer as the term is defined herein. See, for example, "In re Electric Ventilating Corp.", 13 WH Cases 220, "In re Dimensional Displays", 12 WH Cases

847, and “In re Paramount Industries, Inc.", 11 WH Cases 721.

(f) Every bidder must qualify in its own right as a manufacturer under the Act. Therefore, all evidence documenting a bidder's eligibility must be in the name of the bidder. Arrangements or proposals for subcontracting, or a bidder's affiliation or relation with another firm, even one having the same officers or ownership, are not definite commitments nor are they evidence of the bidder's own eligibility as a manufacturer, even though such affiliate or subcontractor might be a qualified manufacturer. The fact that one legal entity may qualify as a manufacturer does not confer such status upon another legal entity. (See Decision of the Hearing Examiner, “In re Alden Industries, Inc.," PC-551, March 16, 1954; "In re Alsco Commercial Furniture Co., Inc.," PC-469, July 16, 1952.)

(g) A bidder's eligibility status on a previous Walsh-Healy contract or its performance as a subcontractor on Walsh-Healy contracts are not determinative evidence of the bidder's present eligibility as a manufacturer.

(h) Activities such as engineering, planning, design, inspection, quality control, testing, marking, packaging, and repackaging and shipping may be incidental, ancillary or necessary to manufacturing. Nevertheless, such operations are not, standing alone, or in combination, considered "manufacturing," i.e. fabrication or production. The proposed performance solely of such activities does not qualify a firm as a manufacturer.

§ 50-206.52 Assembler.

(a) As a result of changing technology in the area of manufacturing, the Department has concluded that it is now necessary to provide a fuller discussion of the standards that an assembler must meet to qualify as a manufacturer.

(b)(1) "Assembly" means piecing or bringing together various interdependent or interrelated parts or components so as to make an operable whole or unit. (Decision of the Comptroller General, B-164770, September 3, 1968 (not officially published).) A firm which produces final items on its

premises by assembling component parts, all or some of which have been purchased from others, will generally be considered to be a “manufacturer” where it performs a series of assembly operations utilizing machines, tools and workers which constitute substantial and significant fabrication or production of the desired product. The qualifications of a bidder as a manufacturer who proposes to "assemble" must be decided on the basis of all the facts and circumstances surrounding a particular procurement.

(2) Thus, the determination of whether a bidder proposing to assemble a final product from component parts is an eligible manufacturer must rest on whether the bidder has demonstrated an independent ability, with its plant, equipment and personnel, to perform a significant or substantial portion of the manufacturing operations and efforts required in producing the final product for which the government contracted.

(3) In the alternative, a bidder may also qualify as a manufacturer if it has the facilities to produce on its premises a significant portion of the required component parts needed for the final product even if the bidder will only perform assembly operations under a particular procurement.

(c) Firms which only perform minimal operations upon the item being procured cannot qualify as manufacturers. To allow any such bidder to do so would obviously frustrate the purposes of the Act. As stated in the Decision of the Hearing Examiner "In re Brentwood Radios, Inc.," 12 WH Cases 158, 162 (1954):

Confident that the Act and Regulations defining a manufacturer contemplate something more than the occasional and isolated performance of such a simple assembly operation on but two Government contract items of a sundry nature, as disclosed by the record in this case, I have concluded that the corporation cannot justifiedly be regarded as bona fide manufacturer, even of such items, qualified to do business with the Government. Except for the negligible amount of time expended by the two officers of the corporation on such assembly operation over seven years of corporate existence, the corporation has at no time engaged in any other assembly or manufacturing operations for the Government and in no civilian production at all.

(See also "Tyco, Inc. v. Hodgson," 67 CCH Labor Cases 32,652 (E.D. Va., 1971 (not officially published)); and "In re John F. Noble Company," Decision of the Trial Examiner, PC-184, March 29, 1945.) As the court stated in "George v. Mitchell," 282 F.2d 486, 493 (C.A. D.C., 1960), while Congress in enacting the Walsh-Healey Public Contracts Act "may have been concerned for the small businessman capable of sustaining the administrative burdens of bidding for and processing Government contracts, we do not think it intended to protect producers who could not independently perform those minimal contracting functions."

(d) Packaging by itself does not constitute "assembly." For example, a bidder who proposes to supply bottles of aspirin in units of 100 and whose only operations would be the purchase in bulk of the aspirin and the bottles, the transferring of the aspirin from the bulk container to the bottles, and the labeling, wrapping, and shipping of the bottled aspirin, would not qualify as a manufacturer. Furthermore, a bidder proposing to purchase a hose and a clamp and place the clamp on the hose to make a "hose assembly," and then package and ship the item, is not a manufacturer within the intent of the Act. (See also Decision of the Comptroller General, B-164770, September 3, 1968 (not officially published).)

§ 50-206.53 Regular dealer.

(a) A bidder may qualify as a regular dealer under 41 CFR 50-201.101(b) if it owns, operates, or maintains a store, warehouse, or other establishment in which the commodities or goods of the general character described by the specifications and required under the contract are bought, kept in stock, and sold to the public in the usual course of business. The storage of goods in a public warehouse will not in itself satisfy the place of business requirements of this definition unless there is a continuing right (i.e. bona fide written lease agreement) to a specified, identified amount of space in the warehouse. A bidder who desires to qualify for award as a regular dealer must show to the satisfaction of the contracting agency prior to any award

that it is engaged in an established, regular business meeting all the criteria of 41 CFR 50-201.101(a)(2). It is not enough in the case of a regular dealer to show only that arrangements have been made to set up such a business; before an award can be made, it is essential that it shows an already established business regularly dealing in the particular goods or goods of the general character offered to the Government.

(b) A bidder must be able to show before award:

(1) That the bidder has an establishment or leased or assigned space in which it regularly maintains a stock of goods in which it claims to be a dealer; if the space is in a public warehouse, it must be maintained on a continuing, and not on a demand, basis;

(2) That the stock maintained is a true inventory from which sales are made; the requirement is not satisfied by a stock of sample or display goods, or by a stock consisting of surplus goods remaining from prior orders, or by stock unrelated to the supplies which are the subject of the bid, or by a stock maintained primarily for the purpose of token compliance with the Act from which few, if any, sales are made;

(3) That the goods stocked are of the same general character as the goods to be supplied under the contract; to be of the same general character, the items to be supplied must be either identical with those in stock or goods for which dealers in the same line of business would be an obvious source;

(4) That sales are made regularly from stock on a recurring basis; they cannot be only occasional and constitute an exception to the usual operations of the business; the proportion of sales from stock that will satisfy the requirements will depend upon the character of the business;

(5) That sales are made regularly in the usual course of business to the public, i.e., to purchasers other than Federal, State, or local Government agencies; this requirement is not satisfied if the contractor merely seeks to sell to the public but has not yet made such sales; if Government agencies are the sole purchasers, the bidder will not qualify as a regular dealer; the

number and amount of sales which must be made to the public will necessarily vary with the amount of total sales and the nature of the business; and

(6) That the business is an established and going concern; it is not sufficient to show that arrangements have been made to set up such a busi

ness.

(c) With regard to the test in paragraphs (b) (5) and (6) of this section, as stated in the Decision of the Administrator, "In re Herbert Co." (9 WH Cases 561, 562 (1950)): “It is plain that the Act and Regulations intended to bar from receipt of Government contracts those persons whose regular method of operation is to secure contracts and thereafter buy elsewhere the goods necessary to fill the contract. While it was not contemplated by the regulations that every Government contract awarded to a dealer be filled from stock on hand, it was the intention to require that Government contracts should be awarded only to those dealers who maintain a stock of goods of the general character required under the Government contract in question, and who, as a regular course of business dealings, make sales from such stocks. It is not sufficient for a dealer to show that some sales are made from stock, or that sales from stock are not unusual in his business; rather he must show that in the usual course of his business a very substantial amount of his sales are made from stocks on hand" (emphasis added).

(d) Coal dealers are exempted from the regular dealer requirements of the Act on certain express terms and conditions which are set forth in 41 CFR 50-201.604(a). The exemption will be applicable only if these conditions are complied with. If they are not, the general definition of regular dealers contained in 41 CFR 50-201.101(a)(2) of the regulations would be applicable.

§ 50-206.54 Regular dealer in particular products.

In addition to the exemptions from the requirements of section 1(a) of the

Act which have been granted for certain types of contracts as set forth in 41 CFR 50-201.604, special alternate qualifications have been prescribed for hay, grain, feed, or straw; raw cotton; lumber and timber products; machine tools; green coffee, petroleum; agricultural liming materials; tea; raw or unmanufactured cotton linters; certain uranium products and used automated data processing (ADP) equipment in recognition of existing industrial and commercial practices in those industries. These special qualifications may be found in 41 CFR 50-201.101(a)(2) and 41 CFR 50-201.604. Characteristic of these alternative qualifications is the absence of a requirement that the dealer physically maintain a stock.

§ 50-206.55 Agents.

A "manufacturer" or "regular dealer" within the meaning of the Act and regulations may bid, negotiate, and contract through an authorized agent if the agency is disclosed and the agent bids and contracts in the name of the principal. Brokers from whom foreign-made goods consigned directly to the Government are purchased need not qualify as regular dealers under 41 CFR 50-201.101(a)(2) since the contract itself is not subject to the Act.

§ 50-206.56 Administrative exemptions.

Sections 50-201.101(a)(3)(ii) and 50201.601 of Regulations 41 CFR Part 50-201, provide for the granting of exceptions and exemptions from the application of section 1(a) of the Act upon request by the head of the contracting agency to the Administrator, Wage and Hour Division. Such request should contain all pertinent information enabling the Administrator to determine if such exemption is necessary to avoid the serious impairment of the conduct of Government business. Any such request will be published in the FEDERAL REGISTER as a proposal with time for public comment.