DATE: March 13, 1992
CASE NO. 82-CTA-334
IN THE MATTER OF
U.S. DEPARTMENT OF LABOR,
v.
BERGEN COUNTY, NEW JERSEY, CETA.
BEFORE: THE SECRETARY OF LABOR
FINAL DECISION AND ORDER
This case arises under the Comprehensive Employment and
Training Act (CETA or the Act), 29 U.S.C. §§ 801-999
(Supp. V 1981), [1] and its regulations, 20 C.F.R. Parts 675-680
(1990). The Grant Officer (G.O.) filed exceptions to the
Decision and Order (D. and O.) of the Administrative Law Judge
(ALJ) insofar as it held that certain CETA funds which the G.O.
concluded had been misspent need not be repaid. The case was
accepted for review in accordance with the applicable procedure.
BACKGROUND
In his final determination, dated August 19, 1982, the G.O.
disallowed a total of $265,485.00 for two contracts awarded by
the Bergen County Community Action Program (BCCAP) to the
National Training Systems Corporation (NTSC) because the
contracts were awarded without competition. See
Department of Labor Exhibits (DX) 3, Tab 8; 2 at 29. In the
Request for Proposals (RFP), BCCAP sought proposals for
vocational training in several specified occupational fields.
The RFP also stated that "proposals will be considered for other
occupational fields, whether traditional or newly demanded, if
adequate documentation of need is presented." Respondent's
Exhibit (RX) 1 at 3.
BCCAP received seventeen proposals, Transcript (T.) 69, ten
of which were offered into evidence. RX 3 and 4. NTSC was the
[PAGE 2]
only offeror to submit a "supported work" [2] program proposal.
Under Title I of CETA BCCAP entered into two contracts with NTSC:
(1) a contract for $16,320.00 to conduct a feasibility study to
plan a supported work program and (2) a contract for $249,165.00
to implement a supported work program. See DX 2 at 29; D.
and O. at 2. In neither case does the record show that BCCAP
sought competition for providing these services from any other
vendor.
The ALJ agreed that the NTSC contracts were improperly
awarded, D. and O. at 7, but found that repayment would
constitute an unduly onerous burden and, under circumstances
such as this case, in which full or substantial performance has
been completed, any remedial steps should be prospective in
nature. Id. at 9-10. He therefore allowed these
expenditures. Id. at 10.
DISCUSSION
A. Competition in Awarding Contracts
The G.O. argues that Bergen County, the grantee, has waived
its right to review of whether it violated federal procurement
standards in the award of the NTSC contracts because it raised no
exceptions to the ALJ's decision. G.O. Reply Brief (Rep. Br.) at
2-3. While 20 C.F.R. § 676.91(f) requires that all
exceptions be raised or waived, this requirement has been
construed as imposing obligations only on the losing party or a
prevailing party which seeks to alter the judgment. In the
Matter of U.S. Department of Labor v. City of Tacoma,
Washington, Case No. 83-CTA-288, Sec. Ord. Oct. 24, 1990,
slip op. at 3-4. Moreover, this regulatory provision was
promulgated after the period for filing exceptions in this case
had expired. See 20 C.F.R. 676.91(f) (1982); amended by
49 Fed. Reg. 19,640, May 9, 1984.
In the instant case, the grantee received a favorable
judgment in that the expenditures for the NTSC contracts were
allowed. I therefore conclude that the grantee need not have
filed exceptions to contest the absence of competition findings
because it would be seeking to support rather than alter the
judgment. SeeCity of Tacoma, slip op. at 3-4.
The grantee argues that the ALJ erred in finding that it did
not comply with applicable CETA regulations by promoting free and
open competition. Grantee's Brief (Gr. Br.) at 2. By drafting
the RFP as it did, BCCAP, the grantee argues, met the
requirements of Federal Management Circular (FMC) 74-7 and
promoted maximum competition by attracting a wide range of
proposals. Gr. Br. at 6. The CETA regulation applicable to
these contracts, 29 C.F.R. § 98.20 (1983), adopts FMC 74-7
as the standard for reviewing procurement of services. It
provides that "all procurement transactions . . . shall be
conducted in a manner that provides maximum open and free
competition." DX 1.
The ALJ observed that the request for "innovative" programs
[PAGE 3]
was entirely open ended. While it may have stimulated
competition in the development of ideas for new programs, the ALJ
concluded that it fostered no competition for expenditures on
plans to study or implement them. D. and O. at 6. Both the
contract for the feasibility study and the contract to implement
the supported work program were awarded to NTSC without
competition. The ALJ, while noting that the supported work
concept was new, concluded that there was no justification for
failing to explore competitive supply options. Id. at 7.
He agreed with the G.O. that the NTSC contracts were, in effect,
sole source procurements awarded in violation of FMC 74-7 and 29
C.F.R. § 98.20. Id.
Under federal procurement law, there is a presumption in
favor of all feasible competition. Unless an offeror is the
only known source with the capability to satisfy the procuring
activity's requirements, a sole source decision will be held to have no rational basis. Aero Corporation v. Department of the
Navy, 540 F. Supp. 180, 208-09 (D.D.C. 1982). SeeBurroughs Corp. v. United States, 617 F.2d 590, 599 (Ct.
Cl. 1980) (sole source procurements strongly discouraged by
procurement regulations which state that all purchases to be made
on competitive basis to maximum practicable extent.)
Once the grantee decided it wanted a supported work program,
the awards were made to NTSC without competition notwithstanding
that the grantee conceded, as the ALJ noted, D. and O. at 7, that
there was another possible source. Moreover, an RFP for a
supported work program may have generated even more proposals.
Because the awards were made without establishing that NTSC was
the only known source which could satisfy the grantee's
requirements, the decision to award the contracts to NTSC is
without rational basis. Aero Corporation, 540 F. Supp. at
208. These contracts are therefore improper expenditures under
CETA as the services were not procured in a manner that provides
maximum open and free competition. 29 C.F.R. § 98.20; FMC
74-7.
B. Repayment of Misspent Funds
Although the ALJ found that the NTSC contracts were not
competitively procured, he declined to order repayment because
in his view it would constitute an unduly onerous burden on the
grantee. D. and O. at 9. The ALJ reasoned that unlike some
other CETA audit cases, the government has been the recipient of
valuable services under these contracts. Following the policy of
the Comptroller General in noncompetitive procurement cases, the
ALJ concluded that any remedial steps should be prospective in
nature and, therefore, ordered that the expenditures on the NTSC
contracts be allowed. Id. at 9-10.
In addressing the repayment issue, the first step is to
determine the amount of funds misspent. Where there has been a
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noncompetitive procurement, the misspent amount is considered to
be the full amount of the award. [3] City of St. Louis v.
U.S. Department of Labor, 787 F.2d 342, 344, 347 (8th Cir.
1986). SeeOnslow County, North Carolina v. U.S.
Department of Labor, 774 F.2d 607, 613 & n.7 (4th Cir. 1985).
The next step is to consider if repayment of any of the
misspent funds should be waived. CETA Section 106(d), 29 U.S.C.
§ 816(d), allows for waiver of repayment for misspent CETA
funds in certain instances. CETA, however, creates a presumption
in favor of repayment and the exception to this rule is narrow.
Chicano Education and Manpower Services v. United States
Department of Labor, 909 F.2d 1320, 1327 (9th Cir. 1990).
To implement Section 106(d), the Department of Labor
promulgated 20 C.F.R. § 676.88(c). SeeIn the
Matter of Blackfeet Tribe v. United States Department of
Labor, Case
No. 85-CPA-45, Sec. Dec. Dec. 2, 1991, slip op. at 4 & n.3.
In considering the waiver of repayment issue, the Department, [4]
as the G.O. argues, G.O. Br. at 16, is only required to take
into account those specific equitable factors listed in Section
676.88(c), but may also consider "factors not covered by the
regulation." [5] Chicano, 909 F.2d at 1327. In this
instance, there is no discretion to waive repayment of the
amounts awarded to NTSC through noncompetitive procurements
because the waiver provision of Section 676.88(c) applies only to
misspent funds associated with public service employment programs
(Title VI of CETA) and ineligible participants. In the Matter
of United States Department of Labor v. Rockingham/Strafford
Employment and Training Consortium, Case No. 81-CTA-363, Sec.
Dec. Mar. 11, 1991, slip op. at 4; In the Matter of Central
Tribes of the Shawnee Area, Inc. v. U.S. Department of Labor,
Case No. 85-CPA-17, Sec. Dec. Dec. 14, 1989, slip op. at 3-5.
CONCLUSION AND ORDER
For the foregoing reasons, I affirm the ALJ's finding that
the $265,485.00 spent on the NTSC contracts was misspent since
the procurements were noncompetitive. I reverse the ALJ's
conclusion that these expenditures should be allowed because they
are not "costs associated with ineligible participants and public
service employment programs" repayment of which "may" be waived
if the criteria of 20 C.F.R. § 676.88(c) are met. The
grantee, Bergen County, New Jersey, CETA, is therefore ordered to
pay $265,485.00 to the Department of Labor. This payment shall
be from non-Federal funds. Milwaukee County, Wisconsin v.
Donovan, 771 F.2d 983, 993 (7th Cir. 1985).
SO ORDERED.
[PAGE 5]
__________________________
Secretary of Labor
Washington, D.C.
OAA:TMORRISS:kg:05/16/95
Room S-4309:FPB:523-9728
[ENDNOTES]
[1] CETA was repealed effective October 12, 1982. The
replacement statute, the Job Training Partnership Act, 29 U.S.C.
§§ 1501-1791 (1988), provides that pending proceedings
under CETA are not affected. 29 U.S.C. § 1591(e).
[2] NTSC described supported work as follows: "Supported work
is a vocational skills training program, but it is also much more
in structuring its entire training design on the provision of
highly individualized services to ex-offenders, ex-addicts, and
other target populations to bring them to the point of job-
readiness and place them in meaningful employment." RX 3.
[3] The grantee, citing City of Oakland v. Donovan, 703
F.2d 1104, 1107 (9th Cir. 1983), contends that courts require
that the relief sought for CETA violations have some rational
relationship to the violation, suggesting that full recovery of
the amounts awarded to NTSC would be inappropriate. Gr. Br. at
22. In City of Oakland, the remedy sought was termination
of an $11.7 million grant because of the grantee's failure to
repay a disallowed $61,000.00 subgrant. While the court
disapproved of that remedy, the grantee later agreed to repay the
full amount of the subgrant. SeeCity of Oakland v.
Donovan, 707 F.2d 1013 (9th Cir. 1983). Seeking full
repayment of the NTSC contracts is consistent with the result in
that case.
[4] The grantee contends that 29 C.F.R. § 676.88(c) does
not bind the ALJ or the Secretary concerning the waiver issue.
Gr. Br. at 18. I disagree. Section 676.88(c) applies at all
stages of the administrative process. SeeIn the
Matter of City of Torrance, Case No. 79-CETA-254, Sec. Dec.
Mar. 22, 1988, slip op. at 3-5.
[5] The ALJ's consideration of Comptroller General policy in
procurement cases without first considering if Section 676.88(c)
provided discretion to waive repayment was therefore error.
