National World War II Memorial: Construction Contractor Selection
(30-NOV-01, GAO-02-247R).
To build the National World War II Memorial, the General Services
Administration (GSA) awarded a $56-million contrac in June 2000.
Tompkins, the majority participant in the joint venture, is owned
by J.A. Jones Construction Company, which is owned by J.A. Jones,
Inc., a U.S. subsidiary of Philipp Holzmann AG, a German-based
company. Holzmann pled guilty in August 2000 in the United States
to a criminal antitrust violation for bid rigging on U.S. Agency
for International Development (USAID) construction projects in
Egypt and was fined $30 million. Before awarding the WWII
Memorial construction contract to the Tompkins/Grunley-Walsh
Joint Venture, the GSA contracting officer was aware of
Holzmann's antitrust conviction and took it into account during
her determination of the prospective contractor's responsibility.
The GSA contracting officer followed applicable procedures in
determining that the awardee was a responsible prospective
contractor. The determination of a prospective contractor's
responsibility is a judgment made by the contracting officer. In
determining that the joint venture was a responsible prospective
contractor, the GSA contracting officer documented in the
contract file her consideration that (1) the joint venture met
the Federal Acquisition Regulation (FAR) requirements for a
responsible prospective contractor, which included having a
satisfactory performance record, the ability to obtain the
necessary resources to perform the contract, and having a
satisfactory record of business ethics and integrity; (2) neither
Tompkins nor Tompkins' parent firm had been debarred, suspended,
or proposed for debarment from federal contracts following
Holzmann's antitrust conviction; and (3) Holzmann did not
exercise management control over Tompkins. In considering
Holzmann's antitrust conviction in her responsibility
determination, the GSA contracting officer said that she obtained
information she deemed to be sufficient to determine that the FAR
responsibility standards were met. She also took into account
USAID's May 2001 written statement that J.A. Jones Construction
Company was a responsible contractor and could continue to do
business with USAID.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-247R
ACCNO: A02519
TITLE: National World War II Memorial: Construction Contractor
Selection
DATE: 11/30/2001
SUBJECT: Antitrust law
Construction contracts
Joint ventures
Bidder responsibility
Contracting officers
Contract oversight
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GAO-02-247R
GAO- 02- 247R Construction of the National World War II Memorial
United States General Accounting Office Washington, DC 20548
November 30, 2001 The Honorable John Warner Ranking Member Committee on
Armed Services United States Senate
The Honorable Susan Collins The Honorable Ernest Hollings The Honorable
Daniel Inouye The Honorable Frank Murkowski United States Senate
Subject: National World War II Memorial: Construction Contractor Selection
This letter responds to your request that we review the procedures used by
the General Services Administration (GSA) in awarding the contract on behalf
of the American Battle Monuments Commission (ABMC) to build the National
World War II (WWII) Memorial on the Mall in Washington, D. C. Specifically,
you wanted to know whether GSA followed proper procedures in awarding the
construction contract to a joint venture whose majority participant is owned
by a U. S. company whose parent, a German- based company, was recently
convicted of an antitrust violation.
On June 7, 2001, GSA awarded a $56- million contract to build the WWII
Memorial to the Tompkins/ Grunley- Walsh Joint Venture. Tompkins, the
majority participant in the joint venture, is owned by J. A. Jones
Construction Company, which is owned by J. A. Jones, Inc., a U. S.
subsidiary of Philipp Holzmann AG, a German- based company. 1 In August
2000, Holzmann pled guilty in the United States to a criminal antitrust
violation for bid rigging on U. S. Agency for International Development
(USAID) construction projects in Egypt and was fined $30 million.
1 As of June 1, 2001, Tompkins? name was changed from Charles H. Tompkins
Company to J. A. Jones/ Tompkins Builders, Inc. Tompkins is based in
Washington, D. C., and Jones in Charlotte, North Carolina. The minority
participant in the joint venture awarded the contract is a joint venture
between the Grunley Construction Co., Inc., and the William V. Walsh
Construction Co., Inc., both of Rockville, Maryland.
GAO- 02- 247R Construction of the National World War II Memorial Page 2 To
respond to your request, we met with the GSA contracting officer for the
WWII
Memorial construction procurement and GSA legal staff, reviewed pertinent
procurement documents in the GSA file regarding the contract award, and
reviewed the Federal Acquisition Regulation (FAR). We compared the FAR
requirements to what action the contracting officer took to determine if
proper procedures were followed. We also reviewed documentation in the
contract file relating to Holzmann?s antitrust violation, including the plea
agreement and remedial action taken; Standard and Poor?s information
regarding ownership and affiliation of Holzmann?s subsidiaries; USAID?s
determination of J. A. Jones, Inc. ?s eligibility to receive USAID
contracts; and the agreement between the Department of Defense (DOD) and
Holzmann and J. A. Jones, Inc., that restricts Holzmann?s control over J. A.
Jones, Inc. ?s management. We did our audit work from August to October 2001
in accordance with generally accepted government auditing standards.
Results in Brief
Before awarding the WWII Memorial construction contract in June 2001 to the
Tompkins/ Grunley- Walsh Joint Venture, the GSA contracting officer was
aware of Holzmann?s antitrust conviction and took it into account during her
determination of the prospective contractor?s responsibility. The GSA
contracting officer followed applicable procedures in determining that the
awardee was a responsible prospective contractor and her determination was
supported by both the information she told us she considered as well as the
documents in the GSA contract file.
The determination of a prospective contractor?s responsibility is a judgment
made by the contracting officer. In making a responsibility determination,
the FAR requires agency contracting officers to obtain information
sufficient to be satisfied that a prospective contractor meets the
applicable general responsibility standards specified in the FAR. The
general standards that the FAR requires contracting officers to consider
include such factors as whether the prospective contractor has a
satisfactory performance record, adequate financial resources, and a
satisfactory record of integrity and business ethics. The FAR also requires
contracting officers to check that the prospective contractor is not on the
list of contractors suspended or debarred from receiving government
contracts.
In determining that the joint venture was a responsible prospective
contractor, the GSA contracting officer documented in the contract file her
consideration that (1) the joint venture met the FAR requirements for a
responsible prospective contractor, which included having a satisfactory
performance record, the ability to obtain the necessary resources to perform
the contract, and having a satisfactory record of business ethics and
integrity; (2) neither Tompkins (or the other joint venture participants)
nor Tompkins? parent firm had been debarred, suspended, or proposed for
debarment from federal government contracts following Holzmann?s antitrust
conviction (and there was no indication that Tompkins had participated in
GAO- 02- 247R Construction of the National World War II Memorial Page 3
Holzmann?s misconduct); and (3) Holzmann did not exercise management control
over Tompkins. She said she also took into account that the awardee was not
Holzmann but a joint venture of Washington, D. C., area construction firms,
the majority participant of which is owned by a Holzmann U. S. subsidiary.
In considering Holzmann?s antitrust conviction in her responsibility
determination, the GSA contracting officer said that she obtained
information she deemed to be sufficient to determine that the FAR
responsibility standards were met. She used supporting information that
another GSA contracting officer had used in awarding a contract to a joint
venture formed by J. A. Jones Construction Company (Tompkins? parent firm)
for another construction project about 2 weeks before the award of the WWII
Memorial construction contract. As documented in the contract file, this
material included the remedial and compliance actions taken by Holzmann and
Jones to help ensure that no future antitrust violation would occur and a
formal management separation of the German corporate parent from its U. S.
subsidiaries for U. S. government contracts. The contracting officer also
took into account USAID?s May 2001 written statement that J. A. Jones
Construction Company was a responsible contractor and could continue to do
business with USAID.
We asked GSA and USAID to review a draft of this report. GSA had no comments
and the Legal Counsel for USAID?s Inspector General said the draft was
factually correct.
WWII Memorial Construction Procurement
In July 1998, GSA and ABMC entered into a Memorandum of Understanding,
whereby GSA would award and manage the construction contract for the WWII
Memorial. GSA issued a request for proposals (RFP) for construction in
September 2000 and received proposals in November 2000. Between November
2000 and June 2001, GSA and ABMC evaluated the proposals, allowed the
competitors to make oral presentations, amended the RFP, obtained revised
proposals, evaluated those revised proposals, and made the final source
selection decision. The proposal from the Tompkins/ Grunley- Walsh Joint
Venture was determined to represent the ?best value? to the government on
the basis of a variety of factors, including technical/ management, past
performance, understanding of the services required, and price.
On June 7, 2001, GSA awarded the contract to the Tompkins/ Grunley- Walsh
Joint Venture, of which Tompkins was the majority participant. As shown in
table 1, a U. S. subsidiary of Holzmann owns Tompkins.
GAO- 02- 247R Construction of the National World War II Memorial Page 4
Table 1: Relationship Between Philipp Holzmann and J. A. Jones, Inc., and
Its Subsidiaries
Philipp Holzmann and J. A. Jones, Inc., Relationship Philipp Holzmann
Aktiengesellschaft (AG)
(A German- based firm that owns 100 percent of the voting stock of J. A.
Jones, Inc., and has 2 of the 12 members on J. A. Jones, Inc., Board of
Directors)
J. A. Jones, Inc.
(A U. S. holding company that is a subsidiary of Holzmann and owns J. A.
Jones Construction Company)
J. A. Jones Construction Company
(A wholly owned subsidiary of J. A. Jones, Inc., and owner of J. A. Jones/
Tompkins Builders, Inc.)
J. A. Jones/ Tompkins Builders, Inc.
(A wholly owned subsidiary of J. A. Jones Construction Company and the
majority participant in the joint venture that was awarded the WWII Memorial
construction contract)
Source: J. A. Jones, Inc., and Holzmann?s 2000 Annual Reviews; GSA; and
information from Philipp Holzmann, J. A. Jones, Inc., and Standard & Poor?s
Web sites on the Internet.
Holzmann has owned J. A. Jones, Inc., since 1979. J. A. Jones, Inc., owns J.
A. Jones Construction Company, which was established in 1890. J. A. Jones
Construction Company has owned Tompkins since 1961. Tompkins was established
in the District of Columbia in 1911.
According to the contracting officer, in May 2001, she learned from another
GSA contracting officer that Holzmann had pled guilty to a criminal
antitrust violation in August 2000 for conspiring to suppress and eliminate
competition by rigging bids between 1988 and 1995 on USAID- funded
construction projects in Egypt. Holzmann?s U. S. subsidiary, J. A. Jones
Construction Company, was a minority participant in the joint venture that
was the contractor for those projects.
Requirements for Determining Contractor Responsibility
Under the FAR, government contracts may be awarded to responsible
prospective contractors only. 2 The determination of responsibility is a
judgment made by the contracting officer. No award can be made unless the
contracting officer first makes an affirmative determination of
responsibility.
2 By statute, federal agencies are required to award contracts to
?responsible? sources, 41 U. S. C. 253b. The statutory ?responsibility?
requirement, including the definition of ?responsible source? at 41 U. S. C.
403( 7), has been implemented in FAR part 9, Contractor Qualifications.
GAO- 02- 247R Construction of the National World War II Memorial Page 5 To
be determined responsible, a prospective contractor must meet the general
standards specified in FAR section 9.104, including having a satisfactory
record of integrity and business ethics, a satisfactory performance record,
and the ability to obtain the financial resources necessary to perform the
contract. Other standards specified by the FAR include having the necessary
organization, skills, facilities, and equipment and the ability to comply
with the contract?s delivery or performance schedule. In determining
responsibility, the FAR advises contracting officers that affiliated firms
are normally considered separate entities. However, the FAR further advises
that the contracting officer shall consider the affiliate?s integrity when
it may adversely affect the prospective contractor?s responsibility.
A prospective contractor must also not have been debarred, suspended,
proposed for debarment, or be otherwise declared ineligible for government
contracts in order to be determined responsible. Contractors in any of these
categories are excluded from receiving contracts and are placed on the List
of Parties Excluded From Federal Procurement and Nonprocurement Programs
maintained by GSA for use by contracting officers governmentwide. A
contractor can be debarred, suspended, or proposed for debarment for a
number of reasons, including conviction for antitrust violations such as bid
rigging and other violations of law concerning the award and performance of
government contracts. However, the existence of a cause for debarment or
suspension does not necessarily require that the contractor be debarred or
suspended. In making a debarment or suspension decision, the government is
required by the FAR to consider the seriousness of the contractor?s conduct
as well as whether the contractor has cooperated with the government?s
investigation, agreed to pay for all criminal liability, implemented
remedial measures, and instituted new or revised review and control
procedures and ethics training programs.
In determining a prospective contractor?s responsibility, the contracting
officer is required to possess or obtain information sufficient to be
satisfied that the applicable general responsibility standards specified in
the FAR are met. In addition, contracting officers are advised to support
their determinations by using information sources such as the government?s
List of Parties Excluded From Federal Procurement and Nonprocurement
Programs; records and experience data, including verifiable knowledge from
other contracting offices; the prospective contractor; and other pertinent
government agencies.
Contractor Responsibility Determination for the World War II Memorial
Construction Contract
Before awarding the WWII Memorial construction contract in June 2001 to the
Tompkins/ Grunley- Walsh Joint Venture, the GSA contracting officer was
aware of Holzmann?s antitrust conviction and took it into account during her
determination of the prospective contractor?s responsibility. The GSA
contracting officer followed
GAO- 02- 247R Construction of the National World War II Memorial Page 6
applicable procedures in determining that the awardee was a responsible
prospective
contractor and her determination was supported by both the information she
told us she considered, as well as the documents in the GSA contract file.
The GSA contracting officer made a responsibility determination on June 7,
2001, which was documented in writing and stated that the Tompkins/ Grunley-
Walsh Joint Venture met the general standards of responsibility set forth in
FAR section 9.104. Information in the contract file and reflected in the
contracting officer?s written determination addressed the general standards
specified in the FAR that are a prerequisite for determining that a
prospective contractor is responsible. The contracting officer also said in
her written determination that a review of the information specifically
pertaining to Holzmann?s conviction did not support a nonresponsibility
determination regarding the Tompkins/ Grunley- Walsh Joint Venture and its
ability to construct the National WWII Memorial.
The contracting officer said that in May 2001 (about 1 month before award of
the contract), she heard about Holzmann?s antitrust conviction from another
GSA contracting officer. The other contracting officer was determining
whether J. A. Jones Construction Company (Tompkins? parent company) was a
responsible prospective contractor for participation in a joint venture
being considered for award of a construction contract for the new U. S.
Courthouse in Seattle, WA (an estimated $150- million project).
The contracting officer said that when she became aware of Holzmann?s
antitrust conviction, she verified that none of the participants of the
Tompkins/ Grunley- Walsh Joint Venture were debarred, suspended, or proposed
for debarment from U. S. government contracts by checking the List of
Parties Excluded From Federal Procurement and Nonprocurement Programs-- as
documented in the contract file. In addition, Tompkins? parent, J. A. Jones
Construction Company, had not been determined ineligible to receive USAID
contracts as a result of Holzmann?s misconduct, according to a May 17, 2001,
statement from staff of USAID?s Inspector General. 3 The contracting officer
also used the supporting information used by the other GSA contracting
officer who made an affirmative responsibility determination in May 2001 for
the joint venture formed by J. A. Jones Construction Company (Tompkins?
parent firm) for the Seattle Courthouse construction contract.
According to the contracting officer for the WWII Memorial and as documented
in the contract file, Tompkins? parent firm, J. A. Jones Construction
Company, had taken compliance measures (through J. A. Jones, Inc.) and
separated its management from Holzmann?s. She further noted that Tompkins
itself, a local Washington, D. C., construction firm, also apparently had no
involvement with Holzmann?s misconduct with the USAID projects in Egypt, and
as shown in table 1, is even further removed from Holzmann than is J. A.
Jones Construction Company.
3 Holzmann itself had not been suspended or debarred from government
contracts by USAID because of corrective actions that it agreed to
undertake.
GAO- 02- 247R Construction of the National World War II Memorial Page 7 The
contracting officer said she determined that Holzmann exercised no
management
control over Tompkins because Holzmann does not make up the majority of
Tompkins? parent firm?s Board of Directors and shares neither common
facilities nor employees with Tompkins. Regardless of the affiliation
between Holzmann and its U. S. subsidiaries, the contracting officer said
that she reviewed material relating to Holzmann?s antitrust conviction that
the contracting officer for the Seattle Courthouse project used to support
an affirmative determination of responsibility for J. A. Jones Construction
Company (Tompkins? parent firm) following Holzmann?s conviction. A review of
the information documented in the contract file showed the following:
! A compliance plan that USAID approved on August 28, 2000, permitted J. A.
Jones, Inc., to continue participating in USAID projects. The compliance
plan is a formal agreement between USAID, J. A. Jones, Inc., and Holzmann
regarding eligibility to bid on and perform USAID contracts. To satisfy
USAID that Holzmann and J. A. Jones, Inc., were prepared to take necessary
steps to demonstrate their responsibility as government contractors and ?to
ensure they are observing the highest standards of ethical government
contracting,? Holzmann and J. A. Jones, Inc., agreed, among other things, to
implement the following:
! a formal separation (? firewall?) between J. A. Jones, Inc., and Holzmann
for purposes of day- to- day management of U. S. government contracts to
help ensure that Holzmann has no involvement in decisionmaking by J. A.
Jones, Inc., and its subsidiaries regarding bidding and pricing of
contracts;
! internal audit procedures and corporate policies for deterring, detecting,
investigating, and reporting wrongdoing in the companies? government
contracting business, using compliance with U. S. antitrust law as the
standard;
! training to ensure that personnel from both companies are aware of
applicable laws, regulations, and standards of business conduct regarding
competing for and performing government contracts and the consequences of
any violations; and
! the use of an employee ethical conduct manual with guidelines for
maintaining procurement integrity, compliance with the antitrust laws, and
avoiding fraud and other abuses in government contracting.
! An agreement among Holzmann; J. A. Jones, Inc.; and the Department of
Defense restricted Holzmann?s access to classified information and ability
to control or influence the business or management of J. A. Jones, Inc., in
connection with the performance of certain U. S. government contracts
involving classified information. This ?Special Security Agreement? also
required that the Chairman of J. A. Jones, Inc. ?s corporate board, as well
as its principal officers, must be resident citizens of the United States
who are eligible to possess security clearances.
USAID determined that these measures were acceptable to the government and
justified the continued eligibility of J. A. Jones Construction Company to
bid on and
GAO- 02- 247R Construction of the National World War II Memorial Page 8
receive USAID contracts. The contracting officer said it was significant
that the
agency whose contracts were affected by Holzmann?s misconduct did not
propose Holzmann for debarment and that J. A. Jones Construction Company was
not implicated in the misconduct by the related Justice Department
investigation.
In addition, included in the contract file was a May 15, 2001, letter from
the President of J. A. Jones Construction Company to the contracting officer
for the Seattle courthouse project addressing the same concerns about the
involvement of J. A. Jones Construction Company in the Egyptian USAID
projects. In this letter, J. A. Jones Construction Company maintained that
it had no knowledge of, or participation in, any improper activities being
investigated. The firm offered to provide GSA with any further information
needed to demonstrate the company?s lack of involvement with any of the
wrongdoing that was the subject of the Justice Department investigation and
its ethical qualification to continue its long history of work for GSA. 4
The GSA contracting officer for the Seattle courthouse project determined
that the joint venture formed by J. A. Jones Construction Company for that
project was a responsible prospective contractor and awarded it the contract
for the Seattle courthouse on May 23, 2001. This determination involving
Jones? responsibility occurred about 2 weeks before award of the WWII
Memorial construction contract to the Tompkins/ Grunley- Walsh Joint
Venture. As shown in table 1, J. A. Jones Construction Company is more
closely related to Holzmann than is Tompkins. According to the contracting
officer for the WWII Memorial, there was thus even less basis to question
whether Holzmann?s misconduct could adversely affect the responsibility of
the Tompkins/ Grunley- Walsh Joint Venture.
Based on the above statements to us by the contracting officer and the
documents we reviewed in the contract file, we believe the GSA contracting
officer followed applicable procedures in determining that the Tompkins/
Grunley- Walsh Joint Venture was a responsible prospective contractor for
construction of the WWII Memorial, notwithstanding the recent antitrust
conviction of the German company whose U. S. subsidiary owns the majority
participant in the joint venture awarded the contract. In awarding the
contract, the contracting officer appears to have properly considered
relevant information pertaining to the FAR standards of responsibility,
including information involving Tompkins? parent firm that addresses
Holzmann?s antitrust conviction. Specifically, she said that she relied on
supporting information used by another GSA contracting officer in his
responsibility determination that included a review of the activities of
Holzmann and its U. S. subsidiaries (including Tompkins? parent firm) in
response to Holzmann?s antitrust conviction, such as remedial and compliance
measures and management separation.
4 The contracting officer for the WWII Memorial said she did not merely rely
on Jones? assertion that it had been exonerated by the Justice Department;
she also reviewed the actual plea agreement between the Justice Department
and Holzmann. The agreement, as documented in the contract file, provides
that upon Holzmann?s guilty plea, and subject to any cooperation requested
by the government from Holzmann or its subsidiaries, the United States would
bring no further criminal charges related to the matter against Holzmann or
its subsidiaries (which includes Jones).
GAO- 02- 247R Construction of the National World War II Memorial Page 9
Accordingly, in awarding the construction contract for the WWII Memorial,
GSA was
aware of-- and took into account-- Holzmann?s recent antitrust conviction.
GSA followed applicable procedures in determining that the joint venture
awardee, the majority participant of which is owned by Holzmann?s U. S.
subsidiary, was a responsible prospective contractor. The contracting
officer?s consideration of information concerning Tompkins? parent firm did
not support a nonresponsibility determination regarding the Tompkins/
Grunley- Walsh Joint Venture and its ability to construct the WWII Memorial.
Agency Comments
We provided copies of a draft of this letter for comment to the
Administrator of GSA and USAID?s Office of Inspector General Legal Counsel.
On November 21, 2001, GSA?s liaison for our work said by E- mail that GSA
had reviewed the report and had no comments. On November 23, 2001, the Legal
Counsel for USAID?s Inspector General stated orally that the draft was
factually correct.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this letter until 30 days after
the date of this letter. At that time, we will send copies to the Chairman,
Senate Committee on Armed Services; Chairman and Ranking Minority Member,
Senate Committee on Governmental Affairs; the Chairman and Ranking Minority
Member, House Committee on Government Reform; the Chairman and Ranking
Minority Member, Senate Subcommittee on Oversight of Government Management,
Restructuring and the District of Columbia; the Chairman and Ranking
Minority Member, House Subcommittee on Technology and Procurement Policy;
the Chairman and Ranking Minority Member, House Subcommittee on Government
Efficiency, Financial Management and Intergovernmental Relations; the
Director of the Office of Management and Budget; and the Administrator of
GSA. The letter will also be available on GAO?s home page at www. gao. gov.
GAO- 02- 247R Construction of the National World War II Memorial Page 10 If
you have any questions regarding this letter, please contact John Baldwin or
Bernard L. Ungar on (202) 512- 8387 or Sheila K. Ratzenberger on (202) 512-
8244. Key contributors to this assignment were Adam Vodraska and Lucy Hall.
Bernard L. Ungar Director, Physical Infrastructure Issues
Sheila K. Ratzenberger Managing Associate General Counsel
(543008)
*** End of document. ***