Midgets Beat Giants

When Manhattan's World Trade Center is topped off in 1974, it will turn part of the run-down lower West Side into a capital of banking, shipping, customs and other international trade services. The twin 110-story towers will require 190,000 tons of steel. Last week steelmen were debating some unusual details of the bidding for that job. More than that, builders were wondering whether the Port of New York Authority's unorthodox contracts for the supply, fabrication and erection of all that metal may lead to a new way of doing business with steel producers.

Out with the Offers. Negotiations started routinely enough in 1964. The Port Authority asked only U.S. Steel and Bethlehem Steel for preliminary estimates, assuming that those two giants alone had the capacity to fill such a huge order. Both companies sent in estimates and draft contracts calling for a total charge of just under $82 million. Two years passed before the Authority sent each company the final specifications for a binding bid. Then U.S. Steel raised its bid to $122.2 million, and Bethlehem came in at $118.1 million.

Stunned by the increases, the Authority junked the bids. It parceled out the work to 13 smaller companies under 15 separate contracts totaling $85.4 million. Now, the Justice Department is looking into the case to decide whether price-fixing or some other collusion was involved in the soaring bids by U.S. and Bethlehem.

Steel executives disclaim any fixing. They argue that the job would have tied up such a large share of the facilities of U.S. Steel or Bethlehem that both companies had to add unusually large contingency costs to their bids. Defenders of the big firms also say that the smaller companies are using much low-cost Japanese steel and that the Port Authority loosened the specifications to enable the smaller firms to bid low. However, an Authority consultant maintains: "The number of tons, the character of the work, the size of the job, and the difficulty of erection were the same."

In on the Action. Executives of some of the smaller companies admit that a desire to get a piece of the huge job prompted them to submit unusually attractive bids. Charles M. Pigott, president of Pacific Car and Foundry Co., says: "It's a more complex job than we anticipated. We don't expect to make any money." Other companies claim to be satisfied with their profits.

U.S. and Bethlehem refuse to comment. The Port Authority reports only that the intricacies of multiple-contract construction--in some cases seven companies are providing steel for a single floor of the Trade Center--have caused no delays or problems. If so, other steel users may find that parceling out work among small firms is less expensive and more efficient than awarding it to the lumbering giants.

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