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.
Page 2 GAO-02-247R Construction of the National World War II Memorial

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
Page GAO-02-247R Construction of the National World War II 3 Memorial

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.
Page 4 GAO-02-247R Construction of the National World War II Memorial

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.
Page GAO-02-247R Construction of the National World War II 5 Memorial

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
Page 6 GAO-02-247R Construction of the National World War II Memorial

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.
Page GAO-02-247R Construction of the National World War II 7 Memorial

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
Page 8 GAO-02-247R Construction of the National World War II Memorial

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).
Page GAO-02-247R Construction of the National World War II 9 Memorial

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.
Page 10 GAO-02-247R Construction of the National World War II Memorial

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)