B-165953, MAY 23, 1969, 48 COMP. GEN. 750

B-165953, MAY 23, 1969, 48 COMP. GEN. 750

CONTRACTS--NEGOTIATION--SPECIFICATIONS UNAVAILABLE--ASSUMPTION OF RISK OF PERFORMANCE A SOLICITATION UNDER 10 U.S.C. 2304 (A) (10) FOR AIR CONDITIONERS TO BE FURNISHED IN ACCORDANCE WITH MILITARY SPECIFICATIONS AND GOVERNMENT DRAWINGS THAT DISCLOSES THE POSSIBILITY OF ERROR IN THE TECHNICAL DATA PACKAGE AND PLACES THE ASSUMPTION OF RISK OF PERFORMANCE ON THE SUCCESSFUL CONTRACTOR BY HOLDING HIM RESPONSIBLE FOR IDENTIFYING AND CORRECTING DEFICIENCIES AND PROVIDING FOR REIMBURSEMENT FOR THE DEFICIENCIES ON A PREDETERMINED BASIS AND ALSO PURSUANT TO THE CHANGES CLAUSE FOR DESIGNATED CHANGES VIOLATING NO LAW OR REGULATION, THE PROCEDURE IS AN ACCEPTABLE SUBSTITUTE FOR THE CONTRACTOR'S NORMAL REMEDY UNDER THE CHANGES CLAUSE. THE FACT THAT THE GOVERNMENT DOES NOT IMPLIEDLY WARRANT THE ADEQUACY OF THE DRAWINGS AND SPECIFICATIONS SHOULD NOT AFFECT COMPETITION ON A COMMON BASIS NOR RESULT IN EXCESSIVE CONTINGENCY COSTS TO THE GOVERNMENT. BIDS-- COMPETITIVE SYSTEM- ASSUMPTION OF PERFORMANCE RISK WHILE ALL OFFERORS UNDER A REQUEST FOR PROPOSALS ISSUED PURSUANT TO 10 U.S.C. 2304 (A) (10) FOR AIR CONDITIONERS AND PROVIDING FOR THE SUCCESSFUL CONTRACTOR TO ASSUME THE RISK OF PERFORMANCE BY HOLDING HIM RESPONSIBLE FOR DETERMINING, IDENTIFYING, AND CORRECTING ANY DISCREPANCY, ERROR, OR DEFICIENCY IN DESIGN OR TECHNICAL DATA IN LIEU OF THE GOVERNMENT'S IMPLIED WARRANTY OF THE ADEQUACY OF THE DRAWINGS AND SPECIFICATIONS MAY NOT HAVE THE FAMILIARITY WITH THE DRAWINGS EQUAL TO THAT OF THE FIRM PREVIOUSLY PRODUCING THE EQUIPMENT, THE SAME IS TRUE IN ANY PROCUREMENT INVOLVING PRIOR PRODUCERS, AND SUCH A NATURAL COMPETITIVE ADVANTAGE IS ONE WHICH THE PROCUREMENT LAWS DO NOT RECOGNIZE AS UNLAWFUL OR EVEN NECESSARILY UNDESIRABLE.

TO DYNAMICS CORPORATION OF AMERICA, MAY 23, 1969:

FURTHER REFERENCE IS MADE TO YOUR LETTERS DATED DECEMBER 26, 1968,AND JANUARY 16, 1969, WITH ENCLOSURE, PROTESTING THE PREPRODUCTION EVALUATION OF TECHNICAL DATA PACKAGE REQUIREMENT UNDER REQUEST FOR PROPOSALS NO. DAAK01-69-R-4062, ISSUED DECEMBER 4, 1968, BY THE UNITED STATES ARMY MOBILITY EQUIPMENT COMMAND, ST. LOUIS, MISSOURI.

THE REQUEST FOR PROPOSALS SOLICITED OFFERS FOR THE REQUIREMENT OF 215 EACH, 9000 BTU/HR AIR CONDITIONERS (4 CLASSES) IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-A-52610 (ME), DATED APRIL 12, 1968, AND 164 EACH, 18,000 BTU/HR AIR CONDITIONERS (3 CLASSES) IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-A-52587A (ME), DATED APRIL 3, 1968, WITH DRAWINGS SPECIFIED FOR EACH CLASS. IN ADDITION, ITEMS 0001 AND 0014 REQUIRED PRICES TO BE SUBMITTED FOR A PREPRODUCTION EVALUATION OF TECHNICAL DATA PACKAGE COVERING THE TOTAL QUANTITY OF AIR CONDITIONERS.

THE NEGOTIATION AUTHORITY CITED BY THE CONTRACTING OFFICER FOR THE INSTANT PROCUREMENT IS 10 U.S.C. 2304 (A) (10) ON THE BASIS THAT "IT IS IMPOSSIBLE TO DRAFT, FOR SOLICITATION OF BIDS, ADEQUATE SPECIFICATIONS OR ANY OTHER ADEQUATELY DETAILED DESCRIPTION OF THE REQUIRED SUPPLIES OR SERVICES." THE CONTRACTING OFFICER'S DETERMINATION AND FINDINGS FURTHER JUSTIFY PROCUREMENT BY NEGOTIATION ON THE BASIS THAT THIS EQUIPMENT IS TO BE FURTHER DEVELOPED BY THE CONTRACTOR AND THE CONTRACTOR WILL BE REQUIRED TO SUPPLY HIS ENGINEERING SERVICES BEFORE PRODUCTION OF THE UNITS WILL BEGIN AND BEFORE ADEQUATE SPECIFICATIONS CAN BE OBTAINED.

EIGHT PROPOSALS WERE RECEIVED AND OPENED FOR EVALUATION ON JANUARY 17, 1969. ALTHOUGH YOUR FIRM DID NOT SUBMIT A PROPOSAL, ELLIS AND WATTS COMPANY (WHICH SHOWS ITS PARENT COMPANY TO BE DYNAMICS CORPORATION OF AMERICA) SUBMITTED A PROPOSAL STIPULATING THE AIR CONDITIONERS WILL BE MANUFACTURED BY FERMONT DIVISION.

THE SPECIFICATION CRITERIA FOR THE PREPRODUCTION AND PRODUCTION EVALUATION OF TECHNICAL DATA WERE SET FORTH AS ARTICLE 1 OF THE RFP, AS FOLLOWS: ARTICLE 1. PREPRODUCTION AND PRODUCTION EVALUATION OF TECHNICAL DATA.

A. PRIOR TO, OR IN CONJUCTION WITH PROCESS PLANNING, TOOL DESIGN, DEVELOPMENT OF INSPECTION PLANS AND PROCEDURES, AND DESIGN OF INSPECTION EQUIPMENT, AND THROUGHOUT THE PRODUCTION AND INSPECTION PHASES OF THE CONTRACT, THE CONTRACTOR SHALL PERFORM A CONTINUOUS DETAILED REVIEW OF ALL TECHNICAL DATA SPECIFIED BY THE GOVERNMENT UNDER THE CONTRACT (INCLUDING STANDARDS, SPECIFICATIONS, DRAWINGS, DATA LISTS, END ITEM FINAL INSPECTION REQUIREMENTS, AND ANY OTHER TYPE OF DATA WHETHER REFERENCED IN ANY OF THE FOREGOING OR SPECIFIED SEPARATELY). THE PURPOSE OF THE REVIEW IS TO DETERMINE, IDENTIFY, AND CORRECT THE EXISTENCE OF ANY DISCREPANCY, ERROR, OR DEFICIENCY IN DESIGN OR TECHNICAL DATA WHICH MAY PRECLUDE PRACTICAL MANUFACTURE OR ASSEMBLY, OR WHICH MAY PRECLUDE THE ATTAINMENT OF THE PERFORMANCE REQUIRED BY THE SPECIFICATIONS (MIL-A-52610 (ME) DATED 12 APRIL 1968 AND MIL-A-52587A (ME) DATED 3 APRIL 1968) AND APPLICABLE DRAWINGS. THE CONTRACTOR UPON DETERMINING OR IDENTIFYING THE EXISTENCE OF ANY SUCH DISCREPANCY, ERROR, OR DEFICIENCY IN DESIGN OR TECHNICAL DATA SHALL PROMPTLY SUBMIT IN EACH CASE ITS RECOMMENDATIONS FOR CHANGE BY AN ENGINEERING CHANGE PROPOSAL (ECP) IN ACCORDANCE WITH THE PROCEDURES SET FORTH HEREIN.

B. CONTRACTOR SHALL RECEIVE PAYMENT FOR ITEM 0001 AND ITEM 0014, PREPRODUCTION AND PRODUCTION EVALUATION OF TECHNICAL DATA, UPON ACCEPTANCE BY THE GOVERNMENT OF THE INITIAL PRODUCTION QUANTITY UNDER THE CONTRACT.

C. IN CONSIDERATION OF PAYMENT FOR PREPRODUCTION AND PRODUCTION EVALUATION OF TECHNICAL DATA AND IN MUTUAL RECOGNITION THAT COMPLIANCE WITH THE FIT, ASSEMBLY, AND OPERATION REQUIREMENTS OF THE DRAWINGS AND THE PERFORMANCE REQUIREMENTS OF THE SPECIFICATIONS FORM THE BASIS FOR THE TERMS AND CONDITIONS OF THIS CONTRACT, THE CONTRACTOR AGREES TO ASSUME SOLE RESPONSIBILITY FOR DISCREPANCIES, ERRORS OR DEFICIENCIES IN DESIGN OR TECHNICAL DATA WHICH PRECLUDES PRACTICAL MANUFACTURE OR ASSEMBLY OR OBTAINMENT OF REQUIRED PERFORMANCE. ANY SUCH DISCREPANCIES, ERRORS OR DEFICIENCIES NOT DETERMINED OR IDENTIFIED BY THE CONTRACTOR AND FOR WHICH RECOMMENDED CORRECTIONS HAVE NOT BEEN SUBMITTED BY ECP SHALL NOT CONSTITUTE AN EXCUSABLE CAUSE UNDER THE DEFAULT CLAUSE NOR ENTITLE CONTRACTOR TO AN EQUITABLE ADJUSTMENT IN CONTRACT PRICE OR DELIVERY UNDER THE CHANGES ARTICLE OR ANY OTHER CONTRACT CLAUSE. ANY CHANGES TO THE CONTRACT RESULTING FROM ANY SUCH DISCREPANCIES, ERRORS OR DEFICIENCIES IN DESIGN OR TECHNICAL DATA WHETHER DETERMINED OR IDENTIFIED BY THE GOVERNMENT OR THE CONTRACTOR SHALL BE EFFECTED WITHOUT INCREASE IN CONTRACT PRICE OR DELAY IN DELIVERY IF THE GOVERNMENT DETERMINES SUCH CHANGE TO BE ESSENTIAL TO:

1. ATTAINMENT OF FUNCTIONAL OR PERFORMANCE REQUIREMENTS OF:

SPECIFICATION MIL-A-52610 (ME) FOR 9,000 BTU/HR AIR CONDITIONER

SPECIFICATION MIL-A-52587A (ME) FOR 18,000 BTU/HR AIR CONDITIONER

2. COMPATIBILITY BETWEEN SPECIFIED QUALITY ASSURANCE PROVISIONS AND THE MANDATORY PHYSICAL OR FUNCTIONAL REQUIREMENTS OF SPECIFICATION AND DRAWINGS.

3. COMPATIBILITY BETWEEN ENGINEERING PARTS LIST AND OTHER TECHNICAL DATA.

4. CORRECTION OF AN IMPOSSIBLE MANUFACTURING CONDITION.

5. CORRECTION OF AN IMPOSSIBLE ASSEMBLY CONDITION.

6. PROCUREMENT OF PURCHASED PARTS AND MATERIAL.

FOR CONTRACT ADMINISTRATION PURPOSES, THE TYPE OF CHANGE DESCRIBED ABOVE SHALL BE REFERRED TO AS A "CATEGORY II CHANGE."

D. THE FOLLOWING TYPES OF CHANGES, WILL BE PROCESSED IN ACCORDANCE WITH "EQUITABLE ADJUSTMENT" PROVISIONS OF THE "CHANGES" ARTICLE OF THE CONTRACT, AND SHALL BE REFERRED TO AS "CATEGORY I CHANGES."

1. CHANGES INITIATED OR APPROVED BY THE GOVERNMENT FOR THE PURPOSE OF PROVIDING IMPROVEMENT IN PERFORMANCE AND RELIABILITY BEYOND THAT REQUIRED BY SPECIFICATION MIL-A-52610 (ME) FOR 9,000 BTU/HR AIR CONDITIONERS AND SPECIFICATION MIL-A-52587A (ME) FOR 18,000 BTU/HR AIR CONDITIONERS.

2. CHANGES TO EXTERNAL CONFIGURATION OR OPERATING CHARACTERISTICS OF THE AIR CONDITIONERS WHICH MAY BE REQUIRED BY THE GOVERNMENT.

3. CHANGES INITIATED BY THE GOVERNMENT FOR IMPROVEMENT OF OPERABILITY, MAINTAINABILITY, SAFETY, USE OF STANDARD PARTS, INTERCHANGEABILITY, AND REPLACEABILITY AND ELECTROMAGNETIC INTERFERENCE.

4. CHANGES IN PACKING AND PACKAGING DATA.

E. WHENEVER THE CONTRACTOR DESIRES TO SUBMIT A VALUE ENGINEERING CHANGE PROPOSAL (VECP) UNDER THE VALUE ENGINEERING CLAUSE OF THIS CONTRACT, OR IF HE OTHERWISE FINDS IT NECESSARY TO SUBMIT AN ENGINEERING CHANGE PROPOSAL (ECP), THE PROPOSAL, REGARDLESS OF CLASSIFICATION, WILL BE PREPARED AND SUBMITTED ON AMC FORMS 1370, 1370A, AND 1370B, AS APPLICABLE, IN ACCORDANCE WITH EXAMPLE "A," APPENDIX V, AMC REGULATION 11-26. ENGINEERING CHANGE PROPOSALS AND VALUE ENGINEERING CHANGE PROPOSALS WILL BE SUBMITTED DIRECT TO THE PROCURING CONTRACTING OFFICER (PCO) WITH A COPY TO THE ADMINISTRATIVE CONTRACTING OFFICER (ACO), AND A COPY TO USAMERDC, FORT BELVOIR, VIRGINIA 22060, ATTN: SMEFB-RDE-KX. SUCH CHANGES SHALL BE SUBMITTED AS SOON AS PRACTICABLE AFTER DISCLOSURE OF THE NEED FOR CHANGE. THE CHANGE AND THE REASON FOR CHANGE SHALL BE CLEARLY AND EXPLICITLY STATED SO AS TO PERMIT EXPEDITIOUS EVALUATION, SERVE AS A BASIN FOR REVISION OF TECHNICAL DATA BY THE GOVERNMENT, AND SERVE AS A BASIS FOR ACCEPTANCE INSPECTION. THE NECESSITY FOR THE CHANGE WILL BE FIRMLY ESTABLISHED. THE ENGINEERING CHANGE PROPOSAL SHALL BE ACCOMPANIED BY MARKED PRINTS OF DRAWINGS, SKETCHES, CALCULATIONS, TEST DATA OR OTHER DATA AS REQUIRED BY THE GOVERNMENT TO SERVE AS A BASIS OF EVALUATION OF THE ENGINEERING CHANGE PROPOSAL. UPON APPROVAL THE ENGINEERING CHANGE PROPOSAL AND INCLOSURES WILL SERVE AS A BASIS OF GOVERNMENT ACCEPTANCE INSPECTION OF PREPRODUCTION AND PRODUCTION OF AIR CONDITIONERS. WITHIN 15 DAYS AFTER RECEIPT OF CATEGORY II ENGINEERING CHANGE PROPOSAL, THE CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE SHALL BE WRITTEN NOTICE TO THE CONTRACTOR, APPROVE OR DISAPPROVE THE ENGINEERING CHANGE PROPOSAL. WITHIN 30 DAYS AFTER RECEIPT OF CATEGORY I ENGINEERING CHANGE PROPOSAL THE CONTRACTING OFFICER SHALL BY WRITTEN NOTICE TO THE CONTRACTOR, APPROVE OR DISAPPROVE THE ENGINEERING CHANGE PROPOSAL.

F. CHANGES RECOMMENDED BY THE CONTRACTOR SPECIFICALLY FOR THE PURPOSE OF SIGNIFICATLY REDUCING PRODUCTION OR OTHER LOGISTIC COSTS SHALL BE SUBMITTED IN ACCORDANCE WITH THE TERMS OF THE "VALUE ENGINEERING INCENTIVE" CLAUSE OF THE CONTRACT, AND SHALL BE SO DESIGNATED IN PARAGRAPH 8(A) OF AMC FORM 1370. ALL ECP SHEETS INVOLVING VALUE ENGINEERING CHANGE PROPOSALS WILL BE IDENTIFIED BY STAMPING "VECP" IN LETTERS AT LEAST 1/2 INCH HIGH AT TOP AND BOTTOM OF EACH SHEET.

G. CATEGORY I ENGINEERING CHANGE PROPOSALS SHALL BE CLEARLY IDENTIFIED BY APPROPRIATE STAMP OR STATEMENT IN BLOCK 1G, AMC FORM 1370 WHICH CONTAINS THE ESSENCE OF THE FOLLOWING, "THIS ENGINEERING CHANGE PROPOSAL IS FOR A CATEGORY I CHANGE AS DEFINED IN CONTRACT REFERENCED IN PARAGRAPH E."

H. CATEGORY II ENGINEERING CHANGE PROPOSALS SHALL BE CLEARLY IDENTIFIED BY APPROPRIATE STAMP OR STATEMENT IN BLOCK 1G, AMC FORM 1370 WHICH CONTAINS THE ESSENCE OF THE FOLLOWING, "THIS ENGINEERING CHANGE PROPOSAL IS FOR A CATEGORY II CHANGE AS DEFINED IN CONTRACT REFERENCED IN PARAGRAPH E."

YOU REQUEST THAT OUR OFFICE TAKE ACTION TO DELETE THE REQUIREMENTS OF ARTICLE I. IN SUPPORT OF THIS REQUEST, YOU NOTE THAT ARTICLE I PLACES THE RESPONSIBILITY FOR THE COMPLETENESS OF THE DRAWINGS AND SPECIFICATIONS AND FOR THE ABILITY OF THE EQUIPMENT TO MEET THE SPECIFICATIONS SOLELY UPON THE CONTRACTOR. THIS IS CONTRARY, YOU SAY, TO THE IMPLIED WARRANTY IMPOSED UPON THE GOVERNMENT THAT DRAWINGS AND SPECIFICATIONS SUPPLIED BY IT WILL BE ADEQUATE FOR THE GOVERNMENT'S NEED.

YOU ASSERT THAT IT IS IMPOSSIBLE FOR ANY CONTRACTOR, OTHER THAN THE ORIGINAL PRODUCER OF THE EQUIPMENT, TO KNOW WHETHER HE CAN ASSUME THAT THE DRAWINGS ARE SUBSTANTIALLY CORRECT OR THAT INDIVIDUAL COMPONENTS CALLED OUT UNDER THE DRAWINGS, WHEN ASSEMBLED IN ACCORDANCE WITH THE DRAWINGS, WILL MEET THE PERFORMANCE REQUIREMENTS. YOU SAY THAT SINCE IT IS IMPOSSIBLE TO PROJECT THE COST OF PROBABLE ERRORS OR PROBABLE DEFECTS IN COMPONENTS, CONTRACTORS CANNOT OFFER INTELLIGENT BIDS AND, THEREFORE, BIDDERS ARE NOT COMPETING ON A COMMON BASIS. IN THAT CONNECTION, YOU CONTEND THAT THE INCLUSION OF ARTICLE I MAY RESULT IN HIGHER PRICES TO THE GOVERNMENT.

FINALLY, YOU CONTEND THAT ARTICLE I CIRCUMVENTS THE PROVISIONS OF THE "CHANGES" CLAUSE OF THE GENERAL PROVISIONS (STANDARD FORM 32). LATENT SPECIFICATION DEFECTS, YOU ASSERT, WOULD PLACE THE CONTRACTOR IN A POSITION OF IMPOSSIBILITY OF PERFORMANCE WHILE AT THE SAME TIME HE IS PRECLUDED FROM RECOURSE TO THE CHANGES CLAUSE. IN ADDITION, YOU BELIEVE THAT THE LIQUIDATED DAMAGES PROVISIONS ADD FURTHER PENALTIES FOR WHICH THE CONTRACTOR IS NOT LEGALLY RESPONSIBLE.

BASICALLY, YOUR PROTEST AGAINST THE INCLUSION OF ARTICLE I UNDER THE RFP IS PREMISED ON THE CONTENTION THAT THE REQUIREMENTS SPELLED OUT THEREIN ARE CONTRARY TO THE ACCEPTED PRINCIPLES OF COMPETITIVE BIDDING. YOU CITE SEVERAL CASES UPHOLDING THE GENERALLY ACCEPTED RULE THAT A CONTRACTOR IS JUSTIFIED IN ASSUMING THAT THE PLANS AND SPECIFICATIONS FORWARDED TO HIM BY THE GOVERNMENT, IF FOLLOWED, ARE CAPABLE OF PRODUCING THE RESULT DESIRED, ABSENT AN ASSUMPTION OF RISK BY THE CONTRACTOR. WHEN THE GOVERNMENT CONTRACTS FOR SUPPLIES TO BE PRODUCED ACCORDING TO GOVERNMENT SPECIFICATIONS, THERE IS AN IMPLIED WARRANTY THAT IF THOSE SPECIFICATIONS ARE FOLLOWED A SATISFACTORY PRODUCT WILL RESULT. SEE UNITED STATES V SPEARIN, 248 U.S. 132; WHITLOCK COIL PIPE CO. V UNITED STATES, 72 CT. CL. 473; STEEL PRODUCTS ENGINEERING CO. V UNITED STATES, 71 CT. CL. 457.

HOWEVER, WE ARE NOT AWARE OF ANY SITUATIONS WHERE THIS DOCTRINE OF IMPLIED WARRANTY OR REPRESENTATION AS TO THE ADEQUACY OF GOVERNMENT SPECIFICATIONS HAS BEEN EXTENDED TO CASES WHERE THE GOVERNMENT DISCLOSES THE INADEQUACIES OF SUCH SPECIFICATIONS AND PERMITS OR REQUIRES THE CONTRACTOR TO MAKE NECESSARY CORRECTIONS. BY INCLUDING ARTICLE I IN THE SOLICITATION, THE GOVERNMENT HAS PLACED PROSPECTIVE OFFERORS ON NOTICE OF THE POSSIBILITY OF ERRORS IN THE TECHNICAL DATA PACKAGE AND THAT THE CONTRACTOR WILL BE RESPONSIBLE FOR DETERMINING, IDENTIFYING AND CORRECTING ANY DISCREPANCY, ERROR OR DEFICIENCY IN DESIGN OR TECHNICAL DATA. UNDER THE SOLICITATION THE CONTRACTOR IS NOT REQUIRED TO RIGIDLY FOLLOW THE DRAWINGS AND SPECIFICATIONS BUT MAY DEPART FROM THEM IF HE CAN DEMONSTRATE AN INCOMPATABILITY IN THE DESIGN OR TECHNICAL DATA AS A RESULT OF HIS EVALUATION OF THE TECHNICAL DATA PACKAGE, IN WHICH CASE HE IS REQUIRED TO PROPOSE THE APPROPRIATE CORRECTIVE ACTION. ACCORDINGLY, THERE IS NO IMPLIED WARRANTY BY THE GOVERNMENT THAT THE DRAWINGS AND SPECIFICATIONS FURNISHED WILL BE ADEQUATE. HERE, WHERE THE GOVERNMENT VESTS IN THE CONTRACTOR DISCRETION, BASED ON ITS TECHNICAL KNOW-HOW, SKILL AND JUDGMENT, TO PRODUCE AN ACCEPTABLE PRODUCT AND PERMITS A CONTRACTOR TO COME FORWARD WITH ITS OWN MODIFICATIONS TO GOVERNMENT SPECIFICATIONS WITH FULL KNOWLEDGE OF THE PERILS OF PERFORMANCE, WE THINK THE ASSUMED RISK OF PERFORMANCE UNDER THE SPECIFICATIONS MAY, AND SHOULD, PROPERLY BE PLACED ON THE CONTRACTOR. CF. THE AUSTIN COMPANY V UNITED STATES, 161 CT. CL. 76 (1963). THE SOLICITATION SPECIFICALLY REQUESTS POTENTIAL CONTRACTORS TO INCLUDE THE COST OF THESE SERVICES IN THEIR PROPOSALS. IN EFFECT, THE SOLICITATION CALLS FOR A PREDETERMINATION OF COSTS TO THE CONTRACTOR IN REMEDYING ERRORS AND DISCREPANCIES IN THE TECHNICAL DATA PACKAGE AND THE CONTRACTOR IS REIMBURSED FOR THESE DEFICIENCIES ON A PREDETERMINED BASIS RATHER THAN UNDER THE EQUITABLE ADJUSTMENT PROVISIONS OF THE CHANGES CLAUSE. WE SEE NO LEGAL IMPEDIMENT TO A SUBSTITUTION OF THIS PROCEDURE IN PLACE OF THE CONTRACTOR'S NORMAL REMEDY UNDER THE CHANGES CLAUSE. MOREOVER, IT SHOULD BE NOTED THAT ARTICLE I PERMITS ACCESS TO THE CHANGES CLAUSE FOR CERTAIN DESIGNATED "CATEGORY I CHANGES."

WE SEE NO MERIT, EITHER, IN YOUR CONTENTIONS REGARDING THE SUBMISSION OF INTELLIGENT BIDS AND THE INABILITY OF OFFICERS TO COMPETE ON A COMMON BASIS. CONTRACTORS ARE OFTEN CALLED UPON TO ESTIMATE PRODUCTION COSTS OF COMPLEX EQUIPMENT PROCURED ON THE BASIS OF A PERFORMANCE SPECIFICATION ALONE AND THEY DO SO WITHOUT UNDUE DIFFICULTIES OR OBJECTIONS. WE FIND NO REASON TO BELIEVE THAT IT WOULD BE MORE DIFFICULT TO ESTIMATE COSTS ON THE BASIS, AS IN THIS CASE, OR A PERFORMANCE SPECIFICATION PLUS DRAWINGS AND DESIGNS WHICH ARE KNOWN TO BE FOR THE MOST PART ESSENTIALLY SOUND. ALL OFFERORS WERE FURNISHED THE SAME TECHNICAL DATA PACKAGE FOR REVIEW AND PREPARATION OF OFFERS AND WE DO NOT VIEW THE DIFFICULTIES, INCIDENT TO ESTIMATING THE COSTS TO REVIEW AND IDENTIFY ERRORS AND TO PROPOSE CONNECTIONS TO OVERCOME DEFECTS, TO BE ANY GREATER THAN ESTIMATING COSTS UNDER PERFORMANCE SPECIFICATIONS ALONE. NOR DO WE THINK THAT SUCH DIFFICULTIES CAN BE VIEWED AS DESTROYING THE COMMON BASIS FOR COMPETITION AMONG OFFERORS.

WE NOTE, IN REGARD TO YOUR ASSERTIONS CONCERNING THE LIQUIDATED DAMAGES PROVISION, THAT THE APPLICABILITY OF THE PROVISION IS LIMITED TO THE TECHNICAL PUBLICATIONS. THE ARMY REPORTS THAT THE AMOUNT TO BE ASSESSED WAS REACHED AFTER CAREFUL CONSIDERATION OF THE PROBABLE INJURY THAT THE GOVERNMENT WOULD SUFFER IN THE EVENT OF DELAYED DELIVERIES. IT IS REPORTED FURTHER THAT THE CLAUSE IS NOT A PENALTY BUT MERELY A SUBSTITUTE FOR THE ACTUAL DAMAGES THAT WOULD BE SUFFERED BY THE GOVERNMENT WERE THE CONTRACT BREACHED. 35 COMP. GEN. 484.

WHILE IT IS TRUE THAT ALL OFFERORS DO NOT HAVE THE FAMILIARITY WITH THE DRAWINGS EQUAL TO THE FIRM WHO PREVIOUSLY PRODUCED THE EQUIPMENT, THE SAME IS TRUE IN ANY PROCUREMENT INVOLVING PRIOR PRODUCERS. A NATURAL COMPETITIVE ADVANTAGE OF THIS TYPE IS ONE WHICH THE PROCUREMENT LAWS DO NOT RECOGNIZE AS UNLAWFUL OR EVEN NECESSARILY UNDESIRABLE. IN ANY EVENT, THE RECEIPT OF EIGHT OFFERS IN THIS CASE WOULD INDICATE THAT THERE WAS SUFFICIENT INTERVENING TIME CLAPSED BETWEEN RECEIPT OF THE RFP AND CLOSING TO ALLOW PROSPECTIVE OFFERORS TO FAMILIARIZE THEMSELVES WITH THE DATA THEY RECEIVED.

WITH REFERENCE TO YOUR CONTENTION THAT THE INCLUSION OF ARTICLE I MAY RESULT IN HIGHER PRICES TO THE GOVERNMENT, THE DEPARTMENT OF THE ARMY OBSERVES THAT AS IN OTHER TYPES OF PROCUREMENT, ESTIMATES MAY VARY WIDELY. SOME PROPOSALS MAY CONTAIN EXCESSIVE ALLOWANCES FOR THE COSTS INVOLVED IN PERFORMING THE REQUIREMENTS OF ARTICLE I WHILE OTHERS WILL NOT INCLUDE ENOUGH ALLOWANCE. IF ADEQUATE COMPETITION IS OBTAINED, THE ARMY BELIEVES THAT PROPOSALS WHICH INCLUDE EXCESSIVE CONTINGENCY ALLOWANCES FOR ARTICLE I COSTS WILL BE SELF-ELIMINATING. WE SEE NO BASIS, AT THIS TIME, UPON WHICH TO DISAGREE WITH THE ARMY'S OBSERVATIONS. ONLY EXPERIENCE IN THE USE OF THE CLAUSE (WHICH PRESENTLY APPEARS TO BE VERY LIMITED) WILL REVEAL WHETHER THE ULTIMATE COST TO THE GOVERNMENT IS EXCESSIVE OR, ON THE OTHER HAND, WHETHER THESE COSTS ARE MORE THAN OFFSET BY THE COSTS INCIDENT TO THE RESOLUTION OF CLAIMS FOR DEFECTIVE OR ERRONEOUS SPECIFICATIONS UNDER THE CHANGES CLAUSE.

IN CONSIDERING A PROTEST AGAINST A GOVERNMENT PROCUREMENT ACTION FROM AN INTERESTED PARTY, OUR PRIMARY FUNCTION IS TO INSURE THAT PROCUREMENTS ARE MADE IN ACCORDANCE WITH APPLICABLE LAW AND THE REGULATIONS ISSUED PURSUANT THERETO. EXCEPT TO THE EXTENT THAT A REQUIREMENT IS IMPOSED DIRECTLY OR INDIRECTLY BY, OR IS IN CONFLICT WITH, THE LAW, WE CANNOT DIRECT THE TERMS, CONDITIONS OR SPECIFICATIONS WHICH ARE TO BE INCLUDED IN AN INVITATION FOR BIDS. SINCE THE FACTS AND CIRCUMSTANCES SHOWN BY THE RECORD BEFORE US DO NOT ESTABLISH THAT THE ACTION OF THE CONTRACTING AGENCY WAS IN VIOLATION OF APPLICABLE LAW OR REGULATION, WE FIND NO BASIS TO WARRANT ACTION BY OUR OFFICE TO DELETE ARTICLE I FROM THE RFP, AND YOUR PROTEST MUST BE DENIED.

IN VIEW OF THE RISKS SHIFTED TO THE CONTRACTOR BY THE PROVISIONS OF ARTICLE I, IT IS ESSENTIAL THAT THE GOVERNMENT ACT PROMPTLY IN ITS CONSIDERATION AND EVALUATION OF CATEGORY II CHANGE PROPOSALS AS PROVIDED UNDER ARTICLE I IF THE CONTRACTOR'S INTERESTS ARE NOT TO BE PREJUDICED. WE HAVE BEEN INFORMALLY ADVISED BY THE DEPARTMENT OF THE ARMY THAT IT INTERPRETS THE LANGUAGE UNDER ARTICLE 42 OF THE RFP ENTITLED "GOVERNMENT DELAY OF WORK," TO ALLOW ADJUSTMENT UNDER THE CHANGES CLAUSE, FOR INCREASED COST OF PERFORMANCE AND/OR EXTENSION OF DELIVERY OR PERFORMANCE DATES, WHEN THE GOVERNMENT FAILS TO ACT IN THE TIMELY MANNER PROVIDED UNDER ARTICLE I. WE VIEW THE ARMY'S INTERPRETATION TO BE NOT ONLY JUSTIFIED BUT COMPELLED BY THE LANGUAGE OF ARTICLE 42 AND THE CIRCUMSTANCES AND CONSIDERATIONS INHERENT IN THE EMPLOYMENT OF ARTICLE I. BY LETTER OF TODAY WE ARE ADVISING THE DEPARTMENT OF THE ARMY OF OUR CONCERN IN THIS RESPECT IN THE EXPECTATION THAT APPROPRIATE DEPARTMENTAL PROCEDURES WILL BE INSTITUTED TO INSURE THAT CATEGORY II CHANGE PROPOSALS WILL BE HANDLED WITHIN THE 15-DAY TIME LIMIT SPECIFIED IN ARTICLE I. ..END