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U.S. DEPARTMENT OF LABOREMPLOYMENT STANDARDS ADMINISTRATIONWASHINGTON, D.C. 20210July 9, 1973MEMORANDUM #113TO: All Government Contracting Agencies of the FederalGovernment and the District of Columbia

SUBJECT: Opinion Letter - June 13, 1973In accordance with our policy of keeping contracting agenciesadvised of current interpretative positions relating to thevarious Government contract labor standards statutes, we are5 attaching a copy of a recent definitive opinion on "assemblers"under the Walsh-Healey Public Contracts Act which should resolveall major questions on this issue.Warren D. LandisAssistant AdministratorAttachment

U.S. DEPARTMENT OF LABOR


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EMPLOYMENT STANDARDS ADMINISTRATIONWASHINGTON, D.C. 20110JUNE 13 1973This is in reply to your letter of March 27, 1973, requestingan interpretation regarding the qualifications of an assembleras a manufacturer within the meaning of the Walsh-Healey PublicContracts Act.The problem basically arises because of the separate category,

"assembler" within section 26(d) of R & I No. 3 dealing with"manufacturer." Although a plain reading of the explanatorylanguage for "assembler" could lead one to conclude that anyassembling qualifies a bidder as a manufacturer, the provisionhas not been interpreted that way by opinion or administrativedecision.It has been our consistent position that an assembler must firstqualify as a manufacturer within the meaning of 41 CFR 50-201.101and ASPR 12-603 before he is eligible for award of a Governmentcontact in the performance of which he performs principally, orexclusively, assembling operations. That is, first an assemblermust be a person or firm who owns, operates at maintains afactory or establishment that produces (i.e., manufacturing

operations) on the praises the materials required under thetwo significant administrative opinions support this view. InBrentwood Radios, Inc., PC-553, affirmed by the Administrator,the argument that assembling of connectors and crank assemblieswith minimum effort and equipment qualified the bidder as amanufacturer under section 26(d) was rebuffed as follows:"Confident that the Act and Regulations defining a manufacturercontemplate something more than the occasional and isolated

2performance of such a single assembly operation on but two


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Government contract items of a sundry nature, as disclosedby the record in this case, I have concluded that thecorporation cannot justifiably be regarded as a bona fidemanufacturer, even of such items, qualified to do businesswith the Government. Except for the negligible amount ofthe expended by the he officers of the corporation ansuch assembly operation over seven years of corporateexistence, the corporation has at no time engaged in any

other assembly or manufacturing operations for the Governmentand in no civilian production at all. "The "something more" required of an assembler was earlier clearlyspelled out in John F. Noble Company, PC-184, affined by theAdministrator, wherein a bidder performed some hauling, surfacing,and assembling of pallets produced elsewhere. The hearingexaminer's answer to respondent's position that this effortmade him an assembler and therefore qualified to receive a contractas "not well taken. " After citing the definition of assemblerin the regulations, the hearing examiner concluded that [i]t isclear that the assembler must also be a manufacturer. "Thus, it is clear that an assembler must first qualify as amanufacturer within the definition at section 26(a) of R & I No. 3

before he is eligible for award of a Government contract forfurnishing supplies, articles or equipment. In the case of afirm newly entering into manufacturing, as is the case of thefirm cited in your letter, certain other factors must be takeninto consideration. The firm must show that the manufacturingactivity in question has not been set up solely to produce on theone Government contract and then terminate its operations(Circular letter 1-58) as well as demonstrating that its leaseand arrangements for space, equipment and personnel are notcontingent upon its receipt of the Government contract (Circularletter 8-61). In effect, the firm must have established arrange-ments on a continuing basis for production of the desired goodsto the Government.

Thus, in the instant case, if the firm can overcome the hurdlesof a newly entering manufacturer, it must then also demonstratethat it can qualify as a section 26(a) manufacturer albeit it mayonly be performing assembling operations on the contract for whichit has bid. It does not appear to us from the informationcontained in your letter that the firm could possibly meet thetest for a manufacturer, given the limited amount of equipment,

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personnel and space at its disposal (assuming that it could evenovercome the tests for a newly entering manufacturer which deter-mination we cannot venture an opinion on, given the limitedinformation provided in the letter). We do not feel that ouranalysis of this problem should be necessarily directed to whetherthe assembling operations are, in terms of input in time or dollarsand cents, or in terms of that the Government wants, a significantor insignificant portion of the contract work in a particular

situation. The determination must rest on whether the bidder hasdemonstrated in the past, or could reasonably be said to have inthe future with the facilities at its disposal, an independentability to perform as the contract by fabricating alone the itemcalled for by the Government. That is to say, could this bidderproduce on its premises the same or related component parts whichit would assemble into the finished product at ship elsewhere forassembly into the same or a like product? If it has, or if itcould, then it meets the tests of a manufacturer and the fact thatit is acting as an assembler only in a given case, and thatactivity in the given case is minimal at best, should be immaterial.Sincerely,Ben P. Robertson

Wage and Hour Division

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