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cordance with this subpart, must be ture on its own premises the goods rejected by the contracting officer called for under the contract) or (2) if (See 41 CFR 50-201.101(a)(3)(i).)
the bidder is “newly entering" into (3) The provisions of 41 CFR 50- such manufacturing activity that the 201.1 require that the representations bidder has made all necessary prior arand stipulations prescribed in section 1 rangements and definite commitments of the Act must be included in invita- for (i) manufacturing space, (ii) equiptions to bid and in contracts subject to ment, and (iii) personnel to perform the Act, either in full or by incorpora on its own premises the manufacturtion by reference. Since no qualifica- ing operations required for the fulfilltions may be placed on the required ment of the contract. A new firm representations and stipulations, any which, prior to the award of a conbid which seeks to avoid full compli- tract, has made such definite prior arance with the Act by any qualification rangements and commitments in order or reservation must be rejected. (See to enter a manufacturing business 16 Comp. Gen. 593.)
which will qualify it should not be (b) The responsibility for applying barred from receiving the award be. the stated eligibility requirements in cause it has not yet done any manuorder to determine whether or not a facturing, even if such arrangement bidder is qualified as a manufacturer and commitments are contingent upon or regular dealer before award rests in the award of a Goverment contract. the first instance with the contracting However, in order to meet the “defiagency pursuant to authority delegat nite commitment” test for "newly ened by the Secretary of Labor in ac- tering” firms, the bidder must have cordance with section 4 of the Act entered into written, legally binding (Circular Letter 8-61), as detailed in arrangements and commitments prior $ 50-201.101(b) of Part 50-201 of this to, even though contingent upon, chapter. It is the obligation of the con award, under which the bidder would tracting agencies to obtain and consid- acquire for itself plant, equipment and er all factual evidence essential to eli- personnel if awarded the Government gibility determinations for all bidders contract. This would be evidence of a in line for award of contracts subject bona fide intent to establish a continuto the Act.
ing manufacturing entity and, as such,
to become an eligible manufacturer. $ 50-206.51 Manufacturer.
This requirement is intended to ex(a)(1) Section 50-201.101(a)(1) of clude from eligibility bidders who Regulations 41 CFR Part 50-201, de- make unsubstantiated assertions that fines a manufacturer as a “person who they are eligible and then totally subowns, operates, or maintains a factory contract or broker the contract after or establishment that produces on the award. premises the materials, supplies, arti- (c)(1) In general, such “newly entercles, or equipment required under the ing" firm must show that the manucontract and of the general character facturing activity in question is not described by the specifications.”
one which has been set up solely to (2) Generally, there should be no produce on a Government contract question as to a bidder's eligibility. and whose operations will be terminatThe bidder either has, or has not, the ed upon completion of that contract. requisite plant, equipment and person In effect, the firm must have estabnel to produce on its own premises the lished arrangements on a continuing goods called for under the Govern basis for production of the goods dement contract.
sired by the Government. (b) A bidder who desires to qualify (2) The documentation required to for an award as a manufacturer must evidence prior arrangements and defishow before the award that it is (1) an nite commitments will vary depending established manufacturer of the par- upon the facts and circumstances of ticular good or goods of the general the particular case. The contents and character sought by the Government bona fides of all documentation and (i.e., that the bidder has a plant, arrangements must be examined to deequipment and personnel to manufac- termine if the spirit and intent of the Act and the regulations have been offers to sell or lease space or equipmet. The following are examples of ment, or affidavit that a sale or conwhat the Department of Labor consid- veyance has occurred, do not constiers as sufficient evidence of all neces- tute legally binding contractual agreesary prior arrangements and definite ments or definite commitments. commitments:
(iii) The best evidence of available (i) Manufacturing space can be
personnel is the presence on the payeither owned or leased by and in the roll of the manufacturing employees name of the bidder. A recorded deed to
necessary to fulfill the contract, Howthe bidder's property in which the
ever, affirmative evidence which the manufacturing is to take place, or a
bidder submits showing what prior arcopy of a properly executed bona fide
rangements and definite commitments lease agreement clearly identifying
it has made to hire its own manufacthe manufacturing space and setting
turing personnel will be considered. forth the terms and conditions of the
(d) A bidder's mere representation or lease, would generally be considered
affirmation that he is a qualified manevidence of prior arrangements and
ufacturer or has fulfilled the above apdefinite commitments for space. In ad
plicable conditions is insufficient. Evidition, as noted above, any such lease
dence must be presented to the conagreement must be legally binding on
tracting agency which shows that the part of both parties to the agree
these conditions are, in fact, met prior ment, the space must be for the exclu
to any award of a contract subject to sive and unrestricted use of the lessee,
the Act. If it is discovered after an and the term of the lease must be of sufficient duration so that the bidder
award that the bidder did not act in will be able to clearly fulfill the con
good faith by actually fulfilling these tract before the lease expires.
acquisition requirements, such con(ii)(A) The bidder must own or have
tract award shall, in accordance with
§ 50-201.101(a)(3)(i)(A) immediately made written, legally binding definite commitments to purchase or lease suf
upon such discovery, be subject to ter
mination by the contracting officer. ficient equipment to manufacture the goods, materials, or articles required
(e) The plain language of the Act for contract fulfillment. A bidder must
and regulations makes it clear that have full, complete and unrestricted covered contracts are to be awarded control of the necessary equipment. A only to contractors who are currently bill of sale or a purchase order may
capable of manufacturing on their evidence definite commitments for premises the goods called for under equipment. The general requirements
the contract or who, if newly entering with respect to a bill of sale or pur
into manufacturing, have made bindchase order are that it be dated and ing commitments before award to signed by the bidder, specifically iden
enable them to produce such goods as tifying and describing the equipment
discussed above. Thus, a bidder's arand the terms of payment for the rangements to use, rent, or share the equipment purchased or to be pur equipment, personnel, or space of anchased, and containing the date by other legal entity on a time and matewhich the vendor delivered or is re rial or “as needed” basis do not constiquired to deliver the equipment.
tute the making of all necessary prior (B) The vendor must provide written arrangements or definite commitevidence of acceptance, such as a bill ments, (See “In re Metalcraft Mfg. or invoice, acknowledging receipt of Sale Corp.”, 15 WH Cases 557, 566 the purchase order, as written, and (1962).) The Department has consistsetting forth the terms of payment in ently held that the availability of the accordance with prevailing business manufacturing and producing estabpractice. Such documentation is nor lishments of others does not qualify mally associated with the consumma- the contractor as a manufacturer as tion of a sale in the usual conduct of the term is defined herein. See, for exbusiness transactions.
ample, "In re Electric Ventilating (C) Letters of intent for space and Corp.”, 13 WH Cases 220, “In re Diequipment or vendor quotations or mensional 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 Deci. sion 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.
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 "asseml 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 en: gaged in any other assembly or manufacturing operations for the Government and in no civilian production at all.
$ 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
(See also "Tyco, Inc. v. Hodgson,” 67 that it is engaged in an established, CCH Labor Cases 132,652 (E.D. Va., regular business meeting all the crite1971 (not officially published)); and ria of 41 CFR 50-201.101(a)(2). It is “In re John F. Noble Company,” Deci. not enough in the case of a regular sion of the Trial Examiner, PC-184, dealer to show only that arrangements March 29, 1945.) As the court stated in have been made to set up such a busi“George v. Mitchell," 282 F.2d 486, 493 ness; before an award can be made, it (C.A. D.C., 1960), while Congress in en is essential that it shows an already esacting the Walsh-Healey Public Con- tablished business regularly dealing in tracts Act “may have been concerned the particular goods or goods of the for the small businessman capable of general character offered to the Gov. sustaining the administrative burdens ernment. of bidding for and processing Govern- (b) A bidder must be able to show ment contracts, we do not think it in before award: tended to protect producers who could (1) That the bidder has an establishnot independently perform those mini ment or leased or assigned space in mal contracting functions."
which it regularly maintains a stock of (d) Packaging by itself does not con goods in which it claims to be a dealer; stitute “assembly.” For example, a if the space is in a public warehouse, it bidder who proposes to supply bottles must be maintained on a continuing, of aspirin in units of 100 and whose and not on a demand, basis; only operations would be the purchase (2) That the stock maintained is a in bulk of the aspirin and the bottles, true inventory from which sales are the transferring of the aspirin from made; the requirement is not satisfied the bulk container to the bottles, and by a stock of sample or display goods, the labeling, wrapping, and shipping or by a stock consisting of surplus of the bottled aspirin, would not quali- goods remaining from prior orders, or fy as a manufacturer. Furthermore, a by stock unrelated to the supplies bidder proposing to purchase a hose which are the subject of the bid, or by and a clamp and place the clamp on a stock maintained primarily for the the hose to make a "hose assembly," purpose of token compliance with the and then package and ship the item, is Act from which few, if any, sales are not a manufacturer within the intent made; of the Act. (See also Decision of the (3) That the goods stocked are of the Comptroller General, B-164770, Sep- same general character as the goods to tember 3, 1968 (not officially pub be supplied under the contract; to be lished).)
of the same general character, the
items to be supplied must be either $ 50-206.53 Regular dealer.
identical with those in stock or goods (a) A bidder may qualify as a regular for which dealers in the same line of dealer under 41 CFR 50-201.101(b) if it business would be an obvious source; owns, operates, or maintains a store, (4) That sales are made regularly warehouse, or other establishment in from stock on a recurring basis; they which the commodities or goods of the cannot be only occasional and constigeneral character described by the tute an exception to the usual operspecifications and required under the ations of the business; the proportion contract are bought, kept in stock, and of sales from stock that will satisfy sold to the public in the usual course the requirements will depend upon the of business. The storage of goods in a character of the business; public warehouse will not in itself sat (5) That sales are made regularly in isfy the place of business requirements the usual course of business to the of this definition unless there is a con public, i.e., to purchasers other than tinuing right (i.e. bona fide written Federal, State, or local Government lease agreement) to a specified, identi agencies; this requirement is not satisfied amount of space in the ware- fied if the contractor merely seeks to house. A bidder who desires to qualify sell to the public but has not yet made for award as a regular dealer must such sales; if Government agencies are show to the satisfaction of the con- the sole purchasers, the bidder will tracting agency prior to any award not qualify as a regular dealer; the number and amount of sales which Act which have been granted for cermust be made to the public will neces- tain types of contracts as set forth in sarily vary with the amount of total 41 CFR 50-201.604, special alternate sales and the nature of the business; qualifications have been prescribed for and
hay, grain, feed, or straw; raw cotton; (6) That the business is an estab- lumber and timber products; machine lished and going concern; it is not suf- tools; green coffee, petroleum; agricul. ficient to show that arrangements tural liming materials; tea; raw or unhave been made to set up such a busi. manufactured cotton linters; certain ness.
uranium products and used automated (c) With regard to the test in para data processing (ADP) equipment in graphs (b) (5) and (6) of this section,
recognition of existing industrial and as stated in the Decision of the Ad
commercial practices in those indusministrator, “In re Herbert Co." (9
tries. These special qualifications may WH Cases 561, 562 (1950)): “It is plain
be found in 41 CFR 50-201.101(a)(2) that the Act and Regulations intended
and 41 CFR 50-201.604. Characteristic to bar from receipt of Government contracts those persons whose regular
of these alternative qualifications is method of operation is to secure con
the absence of a requirement that the tracts and thereafter buy elsewhere dealer physically maintain a stock. the goods necessary to fill the contract. While it was not contemplated by the regulations that every Govern
$ 50-206.55 Agents. ment contract awarded to a dealer be A "manufacturer” or “regular filled from stock on hand, it was the dealer" within the meaning of the Act intention to require that Government and regulations may bid, negotiate, contracts should be awarded only to
and contract through an authorized those dealers who maintain a stock of
agent if the agency is disclosed and goods of the general character re
the agent bids and contracts in the quired under the Government con
name of the principal. Brokers from tract in question, and who, as a regu
whom foreign-made goods consigned lar course of business dealings, make
directly to the Government are pursales from such stocks. It is not suffi
chased need not qualify as regular cient for a dealer to show that some
dealers under 41 CFR 50-201.101(a)(2) sales are made from stock, or that sales from stock are not unusual in his
since the contract itself is not subject business; rather he must show that in
to the Act. the usual course of his business a very substantial amount of his sales are $ 50-206.56 Administrative exemptions. made from stocks on hand” (emphasis
Sections 50-201.101(a)(3)(ii) and 50added).
201.601 of Regulations 41 CFR Part (d) Coal dealers are exempted from
50-201, provide for the granting of exthe regular dealer requirements of the
ceptions and exemptions from the apAct on certain express terms and con
plication of section 1(a) of the Act ditions which are set forth in 41 CFR 50-201.604(a). The exemption will be
upon request by the head of the con
tracting agency to the Administrator, applicable only if these conditions are complied with. If they are not, the
Wage and Hour Division. Such request general definition of regular dealers
should contain all pertinent informacontained in 41 CFR 50-201.101(a)(2)
tion enabling the Administrator to deof the regulations would be applicable.
termine if such exemption is necessary
to avoid the serious impairment of the 8 50–206.54 Regular dealer in particular conduct of Government business. Any products.
such request will be published in the In addition to the exemptions from FEDERAL REGISTER as a proposal with the requirements of section 1(a) of the time for public comment.