Opinion ID: 467580
Heading Depth: 2
Heading Rank: 3

Heading: Ambiguity of Requirement to Formally Advertise for Subcontractors.

Text: 21 The City asserts that the Secretary erred in disallowing the costs of two subcontracts procured through sole source contracting. The City contends that the applicable regulations are 20 C.F.R. Secs. 676.23 and 676.37, and that it interpreted these regulations as requiring prime sponsors merely to have an objective basis for the selection of subcontractors. In addition, the City argues that the paragraph in OMB Circular No. A-102 Revised, Attachment O, 4 requiring formal advertising or competitive procurement did not exist when the City entered the subcontracts in issue. 22 The record indicates that the parties stipulated to the ALJ that OMB Circular No. A-102 was one of the regulations governing this issue. OMB Circular No. A-102 clearly requires each grantee to establish procurement procedures which provide for formal advertising unless such advertising is impracticable or unfeasible. In its present form, OMB Circular No. A-102 applied on and after September 12, 1977. Because the grants in question cover the period from April of 1978 through September of 1980, the City's contention that this provision did not exist lacks merit. 23 We also reject the City's contention that 20 C.F.R. Secs. 676.23 and 676.37 contain ambiguities which support the City's decision to dispense with formal advertising in procuring some subcontractors. As the ALJ noted, these regulations address the qualifications of service deliverers and do not authorize sole source procurement. 5 24 In the alternative, the City argues that both subcontracts fall within an exception to competitive procurement contained in OMB Circular No. A-102. This exception allows prime sponsors to forego competitive bidding where it is impracticable or unfeasible. With regard to one of the subcontracts in issue (that with the Urban League), the City failed to demonstrate that competitive procurement was not feasible or practicable. In 1979, the City asked the Department to allow a subcontract with the Urban League for payroll services without competition. Although the City never received an answer to this inquiry, it entered the subcontract without competition. We agree with the ALJ's conclusion that the lack of a response did not entitle the City to circumvent the requirements of competitive bidding. As to the other subcontract in issue (that with Citizens For Community Development), the City failed to raise this argument before the ALJ and offered no reasons why competitive procurement was not possible. Accordingly, we conclude that the exception did not apply to the subcontracts and that the Secretary properly disallowed these expenditures. 25