B-160870, APR. 27, 1967

B-160870: Apr 27, 1967

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TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO LETTER DATED APRIL 1. IT IS REPORTED THAT: "THE SUBJECT PROCUREMENT IS A MILITARY ASSISTANCE SALE BY THE UNITED STATES TO THE FEDERAL REPUBLIC OF GERMANY WHEREBY THE UNITED STATES PURSUANT TO AN AGREEMENT WITH THE FEDERAL REPUBLIC OF GERMANY WILL PURCHASE 48 MODEL 44B2C ARRESTING GEAR SYSTEMS FROM THE ALL AMERICAN ENGINEERING COMPANY. THE ARRESTERS WILL BE PAID FOR WITH FUNDS OF THE FEDERAL REPUBLIC OF GERMANY. THE PROCUREMENT IS MADE PURSUANT TO THE FOREIGN ASSISTANCE ACT OF 1961. "THE ESSENTIAL FACTS BEHIND THIS PROCUREMENT ARE AS FOLLOWS: THE FEDERAL REPUBLIC OF GERMANY ESTABLISHED A NEED FOR ARRESTERS AS A SAFETY MEASURE IN OPERATING THE LOCKHEED F104G AIRCRAFT.

B-160870, APR. 27, 1967

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO LETTER DATED APRIL 1, 1967, WITH ENCLOSURES, YOUR REFERENCE: IR-OOC:JTT/CLC, FROM THE COUNSEL, NAVAL AIR SYSTEMS COMMAND, REPORTING ON THE PROTEST BY E. W. BLISS COMPANY AGAINST THE AWARD OF A SOLE-SOURCE NEGOTIATED CONTRACT FOR ARRESTING GEAR SYSTEMS TO THE ALL AMERICAN ENGINEERING COMPANY BY THE NAVAL AIR ENGINEERING CENTER (SI), PHILADELPHIA, PENNSYLVANIA.

IT IS REPORTED THAT:

"THE SUBJECT PROCUREMENT IS A MILITARY ASSISTANCE SALE BY THE UNITED STATES TO THE FEDERAL REPUBLIC OF GERMANY WHEREBY THE UNITED STATES PURSUANT TO AN AGREEMENT WITH THE FEDERAL REPUBLIC OF GERMANY WILL PURCHASE 48 MODEL 44B2C ARRESTING GEAR SYSTEMS FROM THE ALL AMERICAN ENGINEERING COMPANY. THE ARRESTERS WILL BE PAID FOR WITH FUNDS OF THE FEDERAL REPUBLIC OF GERMANY. THE PROCUREMENT IS MADE PURSUANT TO THE FOREIGN ASSISTANCE ACT OF 1961, AS AMENDED, AND IN ACCORDANCE WITH THE UNITED STATES - FEDERAL REPUBLIC OF GERMANY AGREEMENTS OF OCTOBER 8, 1956 AND SEPTEMBER 14, 1962. ARMED SERVICES PROCUREMENT REGULATION SECTION 6- 705, ENTITLED "PROCUREMENT FOR MILITARY ASSISTANCE SALES" APPLIES TO THIS SALE.

"THE ESSENTIAL FACTS BEHIND THIS PROCUREMENT ARE AS FOLLOWS: THE FEDERAL REPUBLIC OF GERMANY ESTABLISHED A NEED FOR ARRESTERS AS A SAFETY MEASURE IN OPERATING THE LOCKHEED F104G AIRCRAFT. PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION SECTION 6-705.2 (B), ON OCTOBER 31, 1966, THE NAVAL AIR SYSTEMS COMMAND FURNISHED THE FEDERAL REPUBLIC WITH THE PRICES OF THE ARRESTERS MANUFACTURED BY E. W. BLISS COMPANY AND VORTEC PRODUCTS COMPANY. THE FEDERAL REPUBLIC THEN CONDUCTED A COMPETITIVE TEST PROGRAM WITH ARRESTERS PROVIDED BY E. W. BLISS COMPANY, VORTEC COMPANY AND ALL AMERICAN ENGINEERING COMPANY AND SELECTED THE ALL AMERICAN MODEL 44B2C ARRESTER TO BUY FOR EMERGENCY OVERRUN GEAR PROGRAM. THE FEDERAL REPUBLIC BEGAN NEGOTIATIONS WITH THE ALL AMERICAN ENGINEERING COMPANY DIRECTLY FOR THE PURCHASE. HOWEVER, THE NEGOTIATIONS WERE NOT CONCLUDED BECAUSE OF PATENT RIGHTS CLAIMED BY E. W. BLISS COMPANY WHICH IN THE OPINION OF THE GERMAN GOVERNMENT COULD POSSIBLY INTERFERE WITH THE DELIVERY OF THE ARRESTERS. BECAUSE OF THE URGENT REQUIREMENT OF THE ARRESTERS FOR GERMAN AIR FORCE OPERATIONS TO BE CONDUCTED THIS SUMMER, THE FEDERAL REPUBLIC REQUESTED THE ASSISTANCE OF THE UNITED STATES BY SUGGESTING A GOVERNMENT TO GOVERNMENT AGREEMENT. ON JANUARY 30, 1967, MILITARY ASSISTANCE ADVISORY GROUP, BONN, GERMANY INFORMED THE CHIEF OF NAVAL OPERATIONS THAT THE FEDERAL REPUBLIC OF GERMANY HAD DESIGNATED THE ALL AMERICAN ENGINEERING COMPANY AS THE PROCUREMENT SOURCE OF THE 44B2C ARRESTERS AND REQUESTED PRICE, AVAILABILITY, AND AUTHORITY TO ISSUE A LETTER OF OFFER. ON FEBRUARY 24, 1967, THE CHIEF OF NAVAL OPERATIONS AUTHORIZED THE ISSUANCE OF A LETTER OF OFFER TO THE FEDERAL REPUBLIC OF GERMANY. A COPY OF THE LETTER OF OFFER DD FORM 1513 IS HEREWITH ENCLOSED. UPON THE ACCEPTANCE OF THE LETTER OF OFFER BY THE FEDERAL REPUBLIC, THE NAVAL AIR ENGINEERING CENTER (SI), PHILADELPHIA, WILL EXECUTE A CONTRACT FOR THE M44B2C ARRESTERS WITH ALL AMERICAN ENGINEERING COMPANY.'

IN ITS LETTER DATED FEBRUARY 13, 1967, E. W. BLISS COMPANY PROTESTED THE SOLE-SOURCE NEGOTIATED PROCUREMENT OF ARRESTING GEAR, URGING THAT THE M-44 ARRESTING GEAR SYSTEMS SHOULD BE OBTAINED ON A COMPETITIVE BASIS. THE BLISS COMPANY ALSO STATED THAT IT UNDERSTOOD THAT THE NAVAL AIR ENGINEERING CENTER IS ATTEMPTING THIS PROCUREMENT ON BEHALF OF AND AT THE REQUEST OF THE FEDERAL REPUBLIC OF GERMANY BECAUSE THE STRONG BLISS PATENT POSITION PREVENTS DIRECT GERMAN GOVERNMENT PROCUREMENT.

IN ITS LETTER OF APRIL 13, 1967, TO OUR OFFICE, THE BLISS COMPANY STATES THAT THE SOLE PURPOSE OF THIS PROCUREMENT IS TO CIRCUMVENT THE UNITED STATES AND FOREIGN PATENT RIGHTS OF THE BLISS COMPANY. IT FURTHER STATES THAT AS A RESULT OF A MEETING WITH NAVY PERSONNEL IN JUNE 1966, IT UNDERSTOOD THAT FUTURE PROCUREMENTS OF M-44 UNITS WOULD NOT BE ON A SOLE- SOURCE BASIS. IT FURTHER URGES THAT THIS PROCUREMENT IS FORBIDDEN BY SECTION 6-705 OF THE ARMED SERVICES PROCUREMENT REGULATION, AND THAT THE PROHIBITION HAS NOT BEEN WAIVED BY THE SECRETARY OF DEFENSE, AS PROVIDED IN THE REGULATION. IT ALSO IS URGED THAT "ALTHOUGH THE NAVY'S ACTION IS PROHIBITED BY SECTION 6-705.2 (A) (1), IT SHOULD ALSO BE POINTED OUT THAT EVEN IF THIS PARAGRAPH WERE IGNORED, THE NAVY'S ACTION FURTHER FAILS TO COMPLY WITH THE PROVISIONS OF PARAGRAPH 6-705.2 (B) WHICH SPECIFICALLY REQUIRES THAT THE PROCUREMENT BE ON A COMPETITIVE BASIS.'

SECTION 507 (B) OF THE FOREIGN ASSISTANCE ACT OF 1961, AS AMENDED, 22 U.S.C. 2315 (B), PROVIDES THAT THE PRESIDENT MAY ENTER INTO CONTRACTS FOR THE PROCUREMENT OF DEFENSE ARTICLES OR DEFENSE SERVICES FOR SALE TO ANY FRIENDLY COUNTRY, OR INTERNATIONAL ORGANIZATION UNDER CERTAIN STATED FINANCIAL ARRANGEMENTS, AND FURTHER THAT:

"NO SALES OF UNCLASSIFIED DEFENSE ARTICLES SHALL BE MADE TO THE GOVERNMENT OF ANY ECONOMICALLY DEVELOPED NATION UNDER THE PROVISIONS OF THIS SUBSECTION UNLESS SUCH ARTICLES ARE NOT GENERALLY AVAILABLE FOR PURCHASE BY SUCH NATIONS FROM COMMERCIAL SOURCES IN THE UNITED STATES: PROVIDED, HOWEVER, THAT THE SECRETARY OF DEFENSE MAY WAIVE THE PROVISIONS OF THIS SENTENCE WHEN HE DETERMINES THAT THE WAIVER OF SUCH PROVISIONS IS IN THE NATIONAL INTEREST.'

WITH A SUPPLEMENTARY REPORT DATED APRIL 20, 1967, THERE WERE FORWARDED HERE COPIES OF DOCUMENTS WHICH EVIDENCE THE FACT THAT THE SECRETARY OF DEFENSE, AS IN THE NATIONAL INTEREST, HAS WAIVED, THE STATUTORY PROHIBITION IN THE CASE OF SALES MADE PURSUANT TO SPECIAL INTERNATIONAL AGREEMENTS, AND THAT A SPECIAL INTERNATIONAL AGREEMENT HAS BEEN EXECUTED WITH THE FEDERAL REPUBLIC OF GERMANY. WE THEREFORE CONCLUDE THAT THE INSTANT PROCUREMENT IS NOT SUBJECT TO THE STATUTORY PROHIBITION.

THIS, HOWEVER, DOES NOT RESOLVE THE QUESTION OF THE PROPRIETY OF A NEGOTIATED SOLE-SOURCE PROCUREMENT FROM THE ALL AMERICAN ENGINEERING COMPANY.

PARAGRAPH 6-703.2, ARMED SERVICES PROCUREMENT REGULATION, PROVIDES THAT PROCUREMENT FOR THE MILITARY ASSISTANCE PROGRAM SHALL BE RESTRICTED TO DOMESTIC CONCERNS AND TO UNITED STATES END PRODUCTS; THAT EXCEPT FOR THIS RESTRICTION ON SOLICITATION, PROCUREMENT SHALL BE MADE BY FORMAL ADVERTISING, WHEREVER PRACTICABLE, IN ACCORDANCE WITH THE POLICY OF ASPR PARAGRAPH 2-102.1; SUBJECT TO THE LIMITATIONS PRESCRIBED IN PART I OF SECTION III (OF ASPR) AND PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (A), PROCUREMENT MAY BE EFFECTED BY NEGOTIATION UNDER ANY APPROPRIATE EXCEPTION OF 10 U.S.C. 2304 (A), AND FURTHER THAT THE FOREIGN ASSISTANCE ACT OF 1961 SHALL NOT BE USED AS AUTHORITY TO NEGOTIATE UNDER 10 U.S.C. 2304 (A) (17).

PARAGRAPH 6-705.2 (B), ARMED SERVICES PROCUREMENT REGULATION, PROVIDES AS FOLLOWS:

"/B) IN CONNECTION WITH EACH MILITARY ASSISTANCE SALE EXPECTED TO INVOLVE PROCUREMENT IN EXCESS OF $10,000 WHERE THE PROCUREMENT INVOLVED CANNOT BE PLACED ON THE BASIS OF PRICE COMPETITION (AS, FOR EXAMPLE, WHERE THE FOREIGN CUSTOMER HAS DESIGNATED ONLY ONE SOURCE AS ACCEPTABLE), BEFORE THE DEPARTMENT OF DEFENSE FURNISHES PRICES FOR INFORMATION PURPOSES TO POTENTIAL FOREIGN CUSTOMERS, PRICES SHALL BE REQUESTED FROM PROSPECTIVE SOURCES AND SUCH REQUEST SHALL STATE THAT IT IS FOR INFORMATION FOR THE PURPOSE OF A MILITARY ASSISTANCE SALE AND SHALL IDENTIFY THE CUSTOMER.'

THE RECORD AS SUBMITTED HERE DOES NOT INDICATE WHETHER THE FEDERAL REPUBLIC OF GERMANY, IN REQUESTING THE PROCUREMENT OF ARRESTING GEAR SYSTEMS, MERELY SELECTED THE M-44 (M-44B2C) TYPE OF SYSTEM, OR SPECIFICALLY SELECTED THE ALL AMERICAN ENGINEERING COMPANY AS THE MANUFACTURER OF THE GEAR SYSTEM.

IF THE FEDERAL REPUBLIC OF GERMANY SELECTED ONLY THE TYPE OF GEAR SYSTEM, THEN UNDER THE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION THIS PROCUREMENT IS REQUIRED TO BE MADE ON A FORMALLY ADVERTISED COMPETITIVE BASIS, UNLESS AWARD IS MADE PURSUANT TO ONE OF THE EXCEPTIONS IN SECTION 2304, TITLE 10 UNITED STATES CODE. IN THIS CONNECTION, WE ARE ADVISED BY THE E. W. BLISS COMPANY, THAT IT AND OTHER COMPETITORS AS WELL, ARE READY, ABLE, AND WILLING TO COMPETE FOR AWARD OF A CONTRACT TO SUPPLY M44B2C ARRESTING GEAR ASSEMBLIES AS DESCRIBED IN THE DD FORM 1513, DATED FEBRUARY 27, 1967, SUBMITTED TO THE FEDERAL REPUBLIC OF GERMANY.

IF, ON THE OTHER HAND, THE FEDERAL REPUBLIC OF GERMANY DID, IN FACT, SPECIFICALLY DESIGNATE THE ALL AMERICAN ENGINEERING COMPANY AS THE MANUFACTURER OF THE ASSEMBLY TO BE PROCURED, THEN OF COURSE, THE MATTER FALLS WITHIN THE PURVIEW OF PARAGRAPH 6-705.2 (B), QUOTED ABOVE, AND PROCUREMENT FROM THE DESIGNATED COMPANY IS AUTHORIZED.

THIS ALTERNATIVE CONCLUSION IS REGRETTED, BUT IS NECESSARY ON THERECORD BEFORE US, AND IS MADE BECAUSE OF THE INDICATED URGENCY FOR A DECISION.

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