B-154567, DEC. 28, 1965

B-154567, DEC. 28, 1965

TO JOHN FRANCIS WOOG:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 22, 1965, ON BEHALF OF AUDIO EQUIPMENT COMPANY, INCORPORATED, WITH RESPECT TO ALLEGED IRREGULARITIES IN THE ADMINISTRATION OF CONTRACT NOM-73042 BETWEEN THE UNITED STATES MARINE CORPS AND ARKAY INTERNATIONAL, INCORPORATED, FOR FURNISHING 788 HAND-HELD PUBLIC ADDRESS SYSTEMS, BATTERY OPERATED, WITH CARRYING CASE AND ACCESSORIES, TO BE IN ACCORDANCE WITH PURCHASE DESCRIPTION CSY-3-FY59-10, DATED JUNE 22, 1959, AND AMENDMENT NO. 1 DATED OCTOBER 4, 1963.

UNDER THE TERMS OF THE CONTRACT ARKAY IS REQUIRED TO DELIVER THE PUBLIC ADDRESS SYSTEMS WITHIN 355 DAYS FROM DATE OF AWARD OF CONTRACT. NOT BEING A PRIOR PRODUCER OF THE ITEM, ARKAY WAS REQUIRED TO SUBMIT PRIOR TO COMMENCEMENT OF PRODUCTION, ONE PRE-PRODUCTION SAMPLE FOR PRE-PRODUCTION TEST IN ACCORDANCE WITH TEST PROCEDURES APPROVED BY THE MARINE CORPS. AMENDMENT NO. 1 TO THE PURCHASE DESCRIPTION INCORPORATED IN THE CONTRACT FURTHER PROVIDED THAT SUCH PRE-PRODUCTION TESTS SHOULD BE MADE ON UNITS PRODUCED WITH ACTUAL PRODUCTION TOOLS. AUDIO, BEING A PRIOR PRODUCER OF THE ITEM, APPARENTLY WOULD HAVE BEEN EXEMPT FROM FURNISHING THE PRE- PRODUCTION MODEL.

IT APPEARS FROM THE PAPERS SUBMITTED BY YOU THAT SHORTLY AFTER THE AWARD OF THE CONTRACT, ARKAY INQUIRED WHETHER AUDIO WOULD LEASE CERTAIN PRODUCTION TOOLS REQUIRED FOR THE MANUFACTURE OF THE ITEM OR WHETHER AUDIO WOULD SELL CAST PARTS, SUCH AS THE HANDLE AND MICROPHONE HOUSING. AUDIO ADVISED THAT THEY WOULD NOT CONSIDER THE LEASE OF ANY OF ITS TOOLS NOR THE SALE OF ITS CAST PARTS TO ARKAY. ALSO, IT APPEARS THAT ARKAY INQUIRED ABOUT THE AVAILABILITY OF CERTAIN PARTS FROM SOME OF AUDIO'S SUBCONTRACTORS.

AS A RESULT OF AN ALLEGATION BY COUNSEL FOR AUDIO THAT ARKAY HAD SUBMITTED A PRE-PRODUCTION MODEL FOR TESTING THAT WAS IN FACT A COMMERCIAL MODEL MANUFACTURED BY AUDIO, A COMPARISON WAS MADE BETWEEN ARKAY'S PRE- PRODUCTION SAMPLE AND A UNIT KNOWN TO HAVE BEEN MANUFACTURED BY AUDIO. THIS COMPARISON INDICATED THAT A NUMBER OF COMPONENTS MANUFACTURED BY AUDIO WERE CONTAINED IN THE SAMPLE SUBMITTED BY ARKAY. APPARENTLY ARKAY DOES NOT DISPUTE THAT IT PROCURED A MODEL FROM AUDIO AND SUBMITTED IT TO THE MARINE CORPS AS A PRE-PRODUCTION SAMPLE FOR TESTING UNDER THE CONTRACT. THE MARINE CORPS DETERMINED, IN VIEW OF THE PARTICULAR WORDING OF THE CONTRACT, THAT ARKAY HAD COMPLIED LITERALLY WITH ITS PROVISIONS. HOWEVER, THIS RAISED A QUESTION WHETHER ARKAY COULD FULLY PERFORM THE CONTRACT AS REQUIRED AND WITHIN THE DELIVERY TERMS OF THE CONTRACT. AFTER RECEIVING A DETAILED REPORT FROM THE INSPECTOR OF NAVAL MATERIAL, NEW YORK, THAT ARKAY COULD PERFORM THE CONTRACT AND THAT RIGID INSPECTION WOULD BE MADE TO VERIFY COMPLIANCE WITH SPECIFICATIONS, THE CONTRACTING OFFICER APPROVED THE PRE-PRODUCTION MODEL.

SUBSEQUENT TO APPROVAL OF THE PRE-PRODUCTION MODEL AND AS THE RESULT OF A FURTHER PROTEST, THE DEPUTY ASSISTANT SECRETARY OF DEFENSE (INSTALLATION AND LOGISTICS), REQUESTED THE CENTRAL OFFICE OF THE GENERAL COUNSEL FOR THE DEPARTMENT OF THE NAVY TO LOOK INTO THE MATTER. THAT OFFICE DID NOT CONCUR WITH THE INTERPRETATION OF THE CONTRACT UPON WHICH THE MARINE CORPS' ACTION WAS PREMISED, AND EXPRESSED THE VIEW THAT THE PRE-PRODUCTION MODEL SUBMITTED BY ARKAY DID NOT COMPLY WITH THE CONTRACT REQUIREMENTS. HOWEVER, SINCE THE APPROVAL HAD ALREADY BEEN GIVEN, IT WAS RECOMMENDED THAT THE CONSENT OF THE CONTRACTOR BE OBTAINED TO PROVIDE, WITHOUT ADDITIONAL COST TO THE GOVERNMENT, AN ADDITIONAL UNIT TO BE SELECTED BY THE GOVERNMENT AT RANDOM FROM THE CONTRACTOR'S FIRST PRODUCTION RUN AND TO HAVE SUCH UNIT UNDERGO THE ENVIRONMENTAL AND OTHER TESTING REQUIRED BY THE CONTRACT. ARKAY AGREED TO THIS RECOMMENDATION AND IT WAS FORMALIZED BY A SUPPLEMENTAL AGREEMENT TO THE CONTRACT.

UNDER THE TERMS OF THE CONTRACT, ARKAY IS REQUIRED TO FURNISH 788 HAND- HELD PUBLIC ADDRESS SYSTEMS, BATTERY OPERATED, IN ACCORDANCE WITH SPECIFICATIONS, WITHIN THE DELIVERY TIME SPECIFIED. ALSO, THE CONTRACT REQUIRED ARKAY TO SUBMIT A PRE-PRODUCTION SAMPLE, PRIOR TO COMMENCEMENT OF PRODUCTION UNDER THE CONTRACT, TO BE TESTED AT THE CONTRACTOR'S PLANT. PRE-PRODUCTION TEST PROCEDURES WERE REQUIRED TO BE SUBMITTED TO THE MARINE CORPS FOR REVIEW AND APPROVAL 14 DAYS PRIOR TO COMMENCEMENT OF PRE- PRODUCTION TESTING AND, AS STATED ABOVE, AMENDMENT 1 TO THE SPECIFICATIONS REQUIRED THAT "PREPRODUCTION TESTS SHALL BE MADE ON UNITS PRODUCED WITH ACTUAL PRODUCTION TOOLS.'

IN OUR OPINION MUCH CAN BE SAID FOR THE POSITIONS TAKEN BY BOTH THE MARINE CORPS AND THE NAVY. IF, AS DETERMINED BY THE NAVY, THE PRE PRODUCTION SAMPLE WAS REQUIRED TO BE MADE ON THE CONTRACTOR'S OWN PRODUCTION TOOLS, IT WOULD SEEM VIRTUALLY IMPOSSIBLE FOR ANY FIRM TO COMPLY OTHER THAN A MANUFACTURER CURRENTLY PRODUCING THE ITEM OR AT LEAST A VERY SIMILAR ITEM, SINCE THE 30 DAYS FROM THE DATE OF AWARD PROVIDED FOR THE SUBMISSION OF THE SAMPLE WOULD NOT ALLOW SUFFICIENT TIME TO ACQUIRE THE TOOLS, MATERIALS, ETC. ON THE OTHER HAND, THE SUBMISSION OF A SAMPLE IN WHICH A SUBSTANTIAL NUMBER OF THE PARTS WERE PRODUCED BY OTHERS AND WERE NOT THE SAME PARTS THE CONTRACTOR WOULD FURNISH IN THE PRODUCTION RUN, WOULD NOT ESTABLISH THAT THE ACTUAL UNIT THE CONTRACTOR WOULD ULTIMATELY FURNISH WOULD MEET SPECIFICATIONS. THE PRIMARILY OBJECTIVE OF THE CONTRACT IS THE FURNISHING OF 788 PRODUCTION UNITS. THE PURPOSE OF THE PRE-PRODUCTION SAMPLE WAS PRIMARILY TO ESTABLISH THAT THE CONTRACTOR COULD PRODUCE AN ACCEPTABLE ITEM AND PERFORM THE WHOLE CONTRACT WITHIN THE TIME PROVIDED. REGARDLESS OF THE ACTION TAKEN WITH RESPECT TO THE PRE PRODUCTION SAMPLE, THE PRODUCTION UNITS ARE REQUIRED TO MEET SPECIFICATION REQUIREMENTS. PRIOR TO APPROVAL OF THE SAMPLE, THE MARINE CORPS DETERMINED THAT ARKAY COULD FULLY PERFORM THE CONTRACT AS REQUIRED AND WITHIN THE DELIVERY TERMS OF THE CONTRACT.

WE BELIEVE THAT THE AMENDMENT TO THE CONTRACT, IN ACCORDANCE WITH NAVY'S RECOMMENDATION, ADEQUATELY PROTECTED THE INTEREST OF THE GOVERNMENT. THE ONLY OTHER COURSES OF ACTION THAT WOULD SEEM TO HAVE BEEN FEASIBLE WOULD HAVE BEEN TO EXTEND THE TIME FOR THE SUBMISSION OF THE PRE-PRODUCTION SAMPLE, OR TO TERMINATE THE CONTRACT FOR DEFAULT, IN WHICH EVENT THE CONTRACTOR WOULD HAVE BEEN LIABLE FOR ANY DAMAGES THE GOVERNMENT MIGHT SUFFER THEREBY. SINCE IT WAS DETERMINED THAT THE CONTRACTOR COULD TIMELY PERFORM THE PRINCIPAL CONTRACT REQUIREMENT, WE CANNOT SAY THAT THE FAILURE TO TERMINATE WAS ERRONEOUS.

FOR THE FOREGOING REASONS, WE FIND NO LEGAL BASIS TO QUESTION THE ADMINISTRATIVE ACTION TAKEN.