B-146494, DEC. 4, 1961

B-146494, DEC. 4, 1961

TO FORD, LARSON, GREENE AND HORAN:

REFERENCE IS MADE TO YOUR LETTER DATED OCTOBER 11, 1961, WRITTEN IN BEHALF OF HEF, INC., AND PROTESTING AGAINST VARIOUS CONDITIONS IMPOSED BY THE GENERAL SERVICES ADMINISTRATION IN INVITATION FOR BIDS NO. GSA UDS-9- LB-2, UNDER WHICH IT IS PROPOSED TO DISPOSE OF NAVAL INDUSTRIAL RESERVE ORDNANCE PLANT, DOD NO. 473, AND NATIONAL INDUSTRIAL RESERVE PLANT, DOD NO. 217, BOTH OF WHICH ARE LOCATED AT HENDERSON, NEVADA.

THE PLANTS IN QUESTION ARE USED IN THE PRODUCTION OF AMMONIUM PERCHLORATE AND ARE PRESENTLY BEING LEASED TO, AND OPERATED BY, AMERICAN POTASH AND CHEMICAL CORPORATION. YOUR PROTEST QUESTIONS THE AUTHORITY OF THE GENERAL SERVICES ADMINISTRATION TO SELL THESE PLANTS AS SURPLUS PROPERTY AND ALLEGES THAT CERTAIN OF THE CONDITIONS OF SALE WILL OPERATE TO EFFECTIVELY ELIMINATE COMPETITION AND MAY RESULT IN RECEIPT OF ONLY ONE BID--- THAT OF AMERICAN POTASH AND CHEMICAL CORPORATION.

WITH RESPECT TO THE DESIGNATION OF THESE PLANTS AS SURPLUS PROPERTY, YOU ADVISE THAT SECTION 3 (G) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, 40 U.S.C. 472 (G), DEFINES SURPLUS PROPERTY AS "ANY EXCESS PROPERTY NOT REQUIRED FOR THE NEEDS AND THE DISCHARGE OF THE RESPONSIBILITIES OF ALL FEDERAL AGENCIES AS DETERMINED BY THE ADMINISTRATOR.' HOWEVER, YOU POINT OUT THAT THE INVITATION TO BID PROVIDES AS FOLLOWS AT PAGE 2 OF EXHIBIT A:

"BIDDERS ARE ADVISED THAT THE SUCCESSFUL BIDDER WILL BE REQUIRED TO ENTER INTO AN AGREEMENT WITH THE DEPARTMENT OF THE NAVY TO INSURE THAT THERE WILL BE NO DISRUPTION OF THE PRODUCTION OF AMMONIUM PERCHLORATE AT THIS FACILITY. ACCORDINGLY, NO BID WILL BE ACCEPTED UNLESS THIS AGENCY HAS BEEN ADVISED BY THE DEPARTMENT OF THE NAVY THAT THE PROPOSED PURCHASER HAS FURNISHED SATISFACTORY PROOF OF HIS CAPABILITY TO PRODUCE, WITHOUT INTERRUPTION, AMMONIUM PERCHLORATE IN QUANTITY AND QUALITY SUFFICIENT TO MEET THE GOVERNMENT'S REQUIREMENTS.'

YOU CONTEND THAT IF THE GOVERNMENT'S REQUIREMENTS ARE SUCH THAT THIS PLANT MUST PRODUCE AMMONIUM PERCHLORATE IN A CERTAIN QUANTITY AND OF A CERTAIN QUALITY WITHOUT INTERRUPTION, IT CANNOT BE DEEMED SURPLUS PROPERTY AS THAT TERM IS DEFINED ABOVE.

WHILE THE PORTION OF EXHIBIT A QUOTED ABOVE HAS BEEN AMENDED SINCE THE DATE OF YOUR PROTEST SO AS TO ESTABLISH THE CURRENT REQUIREMENTS OF THE GOVERNMENT AT 2 MILLION POUNDS PER MONTH AND THE MOBILIZATION REQUIREMENTS AT 3 MILLION POUNDS, AND TO REQUIRE THE HIGH BIDDER TO FURNISH PROOF SATISFACTORY TO THE DEPARTMENT OF THE NAVY OF HIS TECHNICAL AND FINANCIAL CAPABILITY TO OPERATE THE FACILITY IN SUPPORT OF SUCH REQUIREMENTS, IT IS OUR UNDERSTANDING THAT THE TOTAL PRODUCTIVE CAPACITY OF ALL INDEPENDENTLY- OWNED AMMONIUM PERCHLORATE PLANTS IN THE UNITED STATES IS APPROXIMATELY 1 MILLION POUNDS PER MONTH. SINCE THIS CAPACITY IS INSUFFICIENT TO MEET THE GOVERNMENT'S NEEDS, THE AMENDMENT TO THE INVITATION REFERRED TO ABOVE WOULD NOT APPEAR TO BE DISPOSITIVE OF THE ISSUES YOU HAVE RAISED. SHALL THEREFORE CONSIDER THE MERITS OF YOUR CONTENTIONS.

IN ESSENCE, IT IS YOUR POSITION THAT SO LONG AS THE PRIVATELY-OWNED FACILITIES FOR PRODUCING AMMONIUM PERCHLORATE ARE INCAPABLE OF SUPPLYING THE GOVERNMENT'S NEEDS, THE GOVERNMENT-OWNED PLANTS AT HENDERSON, NEVADA, MUST BE CONSIDERED NECESSARY TO THE GOVERNMENT'S NEEDS AND CANNOT PROPERLY BE DECLARED SURPLUS PROPERTY AS THAT TERM IS DEFINED IN SECTION 3 (G) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT. SINCE THE AUTHORITY OF THE ADMINISTRATOR OF GENERAL SERVICES TO SELL PROPERTY IS LIMITED TO SURPLUS PROPERTY AS DEFINED IN SECTION 3 (G), YOU CONTEND THAT THERE IS NO AUTHORITY UNDER THE LAW TO SELL THE FACILITIES AT HENDERSON, NEVADA, AS SURPLUS PROPERTY.

WHILE YOUR INTERPRETATION OF SECTION 3 (G), AND ITS GENERAL APPLICATION TO THE SALE OF PERSONAL PROPERTY AND NONCOMMERCIAL OR NONINDUSTRIAL REAL PROPERTY MAY BE CORRECT, IT IS OUR OPINION THAT A DISTINCTION MUST BE MADE BETWEEN THE GOVERNMENT'S NEED FOR AN END ITEM AND ITS NEED FOR THE CAPACITY TO PRODUCE SUCH END ITEM. IT IS BASIC, OF COURSE, THAT WHERE A GOVERNMENTAL NEED FOR AN END ITEM EXISTS, A NEED FOR THE CAPACITY TO PRODUCE SUCH ITEM ALSO EXISTS. THE EXISTENCE OF A NEED FOR AN END ITEM BY ONE OR MORE AGENCIES OF THE GOVERNMENT WOULD, GENERALLY SPEAKING, PRECLUDE THE DESIGNATION OF AN IDENTICAL ITEM AS "SURPLUS PROPERTY" UNDER SECTION 3 (G). HOWEVER, WITH RESPECT TO THE CAPACITY TO PRODUCE AN END ITEM, IT WOULD APPEAR THAT THE ONLY NEED OF THE GOVERNMENT IS THAT SUFFICIENT PRODUCTIVE CAPACITY BE IN EXISTENCE, WITHOUT REFERENCE TO WHETHER SUCH PRODUCTIVE CAPACITY IS GOVERNMENT-OWNED OR PRIVATELY-OWNED.

APPLYING THE ABOVE TO THE INSTANT CASE, IT IS APPARENT THAT, WHILE THE GOVERNMENT'S NEED FOR AMMONIUM PERCHLORATE AS AN END ITEM MIGHT PRECLUDE A DESIGNATION OF GOVERNMENT-OWNED AMMONIUM PERCHLORATE AS SURPLUS PROPERTY, THE GOVERNMENT'S NEED FOR THE PRODUCTIVE CAPACITY REPRESENTED BY THE PLANTS AT HENDERSON, NEVADA, IS NO MORE THAN A NEED FOR THE CONTINUED EXISTENCE AND OPERATION OF SUCH PLANTS IN THE PRODUCTION OF AMMONIUM PERCHLORATE, WITHOUT REGARD TO WHETHER THE PLANTS ARE GOVERNMENT-OWNED OR PRIVATELY-OWNED. SINCE THE PROPOSED CONDITIONS OF THE SALE OF THESE PLANTS, WHICH INCLUDE A 10-YEAR NATIONAL SECURITY CLAUSE, APPEAR TO MAKE ADEQUATE PROVISION FOR CONTINUED PRODUCTION TO MEET THE GOVERNMENT'S NEEDS FOR AMMONIUM PERCHLORATE, WE ARE UNABLE TO CONCLUDE THAT THE PLANTS WERE IMPROPERLY DECLARED SURPLUS TO THE GOVERNMENT'S NEEDS OR THAT THE ADMINISTRATOR OF GENERAL SERVICES LACKS THE AUTHORITY TO DISPOSE OF THEM AS SURPLUS PROPERTY. THAT PORTION OF YOUR PROTEST AGAINST THE SALE WHICH IS BASED UPON SUCH GROUNDS MUST THEREFORE BE DENIED.

THE REMAINING GROUNDS ON WHICH YOUR PROTEST IS BASED INVOLVE THE PROPRIETY OF SPECIFIC PROVISIONS OF THE INVITATION FOR BIDS, AND WE WILL CONSIDER EACH SUCH PROVISION ON AN INDIVIDUAL BASIS.

CONCERNING EXISTING LEASES BETWEEN THE GOVERNMENT AND AMERICAN POTASH AND CHEMICAL CORPORATION TO WHICH THE HENDERSON, NEVADA, PLANTS ARE SUBJECT, THE INVITATION ORIGINALLY PROVIDED AS FOLLOWS AT PAGE 4 OF EXHIBIT A:

"THE CONVEYANCE BY THE GOVERNMENT WILL BE SUBJECT TO EXISTING EASEMENTS AND RIGHTS OF WAY OF STREETS, RAILROADS, ROADS, HIGHWAYS AND PUBLIC UTILITIES, IF ANY, AND SUBJECT TO ANY OTHER EASEMENTS, COVENANTS, RESTRICTIONS AND RESERVATIONS OF RECORD AND SUBJECT ALSO TO THE RIGHTS OF THE AMERICAN POTASH AND CHEMICAL COMPANY TO OCCUPY THE PREMISES UNDER NAVY FACILITY CONTRACTS NORD (F) 1740 AND 1741.'

YOU CONTEND THAT A CONVEYANCE SUBJECT TO SUCH EXISTING LEASES PRESENTS A QUESTION TO POTENTIAL PURCHASERS AT TO WHETHER AMERICAN POTASH AND CHEMICAL CORPORATION MAY ASSERT ITS RIGHT TO OCCUPANCY UNDER ITS LEASES AFTER THE PLANTS HAVE BEEN CONVEYED TO ANOTHER PURCHASER. IT IS YOUR OPINION THAT THIS PROVISION IS IMPROPER SINCE IT FRUSTRATES THE PURPOSE OF THE DISPOSAL AND ELIMINATES THE INTEREST OF PROSPECTIVE BIDDERS.

WHILE WE ARE INCLINED TO AGREE WITH YOUR CONCLUSIONS ON THIS PROVISION, THE ISSUANCE OF ADDENDUM NO. 3 TO THE INVITATION SUBSEQUENT TO YOUR PROTEST HAS RESULTED IN AN AMENDMENT TO THE SPECIAL CONDITIONS OF THE INVITATION WHICH PROVIDES THAT A PURCHASER WILL BE PERMITTED TO ASSUME OCCUPANCY AND OPERATE THE FACILITY ON OR ABOUT JULY 1, 1962, BUT IN NO EVENT LATER THAN JANUARY 1, 1963, ON A SPECIFIC DATE TO BE MUTUALLY AGREED UPON WITHIN THESE LIMITING DATES. ADDITIONALLY, THAT PORTION OF PAGE 4 OF EXHIBIT A QUOTED ABOVE WHICH REFERS TO THE LEASES HELD BY AMERICAN POTASH AND CHEMICAL CORPORATION HAS BEEN AMENDED TO READ AS FOLLOWS:

"THOSE RIGHTS NOW EXISTING OF THE AMERICAN POTASH AND CHEMICAL COMPANY (SIC) TO OCCUPY THE PREMISES UNDER NAVY FACILITY CONTRACTS, NORD (F) 1740 AND 1741, WILL BE TERMINATED TO THE EXTENT NECESSARY TO PERMIT THE PURCHASER'S OCCUPANCY OF THE PREMISES UNDER CONDITIONS AND ON THE DATES ESTABLISHED IN THE PARAGRAPH ENTITLED "SPECIAL CONDITION" HEREINBEFORE SET FORTH.'

THESE AMENDMENTS APPEAR TO BIND THE GOVERNMENT TO TERMINATE THE EXISTING LEASES ON DATES COMPATIBLE WITH THOSE ON WHICH A PURCHASER WILL OTHERWISE BECOME ENTITLED TO THE RIGHT OF OCCUPANCY. IN EFFECT, THEY GUARANTEE A PURCHASER THE SALE RIGHT OF OCCUPANCY ON A DATE AGREEABLE TO THE PURCHASER. WE ARE AWARE OF NO VALID BASIS UPON WHICH IT MAY BE CONTENDED THAT THE GOVERNMENT SHOULD, OR COULD, PROVIDE FURTHER ASSURANCE IN THIS AREA TO PURCHASERS OF SURPLUS INDUSTRIAL PROPERTY WHICH IS SUBJECT TO EXISTING LEASES NECESSARY TO CONTINUED OPERATION OF THE PROPERTY. THEREFORE SEE NO OBJECTION TO THE PROVISIONS OF THE INVITATION RELATIVE TO OCCUPANCY, AS AMENDED BY ADDENDUM NO. 3.

CONCERNING THE AVAILABILITY OF WATER AND POWER TO A PURCHASER OF THE PLANT, THE FOLLOWING APPEARS AT PAGE 2 OF EXHIBIT A:

"IT IS INCUMBENT ON PROSPECTIVE BIDDERS TO ASSURE THEMSELVES OF THE AVAILABILITY AS THEIR NEEDS REQUIRE OF UTILITIES AND SERVICES FOR THE OPERATION OF THE FACILITIES AND PRODUCTION OF AMMONIUM PERCHLORATE.'

YOU STATE THAT HEF, INC., HAS BEEN ADVISED THAT WATER WILL BE AVAILABLE ONLY FROM A SEPARATE NEW LINE AT A POINT SEVERAL MILES DISTANT FROM THE PLANT, AND THAT POWER WILL BE AVAILABLE ONLY AT EXCESSIVELY HIGH COST THROUGH THE NEVADA POWER COMPANY. YOU CONTEND THAT BOTH WATER AND POWER WERE ORIGINALLY MADE AVAILABLE FOR THE OPERATION OF THIS PLANT AS A GOVERNMENT-OWNED FACILITY, AND SHOULD BE TRANSFERABLE TO A NEW PURCHASER RATHER THAN REMAIN AVAILABLE ONLY TO THE PRESENT CONTRACTOR-OPERATOR.

IT IS OUR UNDERSTANDING THAT WATER IS PRESENTLY BEING FURNISHED TO AMERICAN POTASH AND CHEMICAL CORPORATION BY BASIC MANAGEMENT INC., A PRIVATE CONCERN, UNDER AN AGREEMENT EXECUTED BETWEEN THOSE CORPORATIONS, WHILE ELECTRIC POWER IS FURNISHED IN THE AREA BY BOTH THE COLORADO RIVER COMMISSION AND THE NEVADA POWER COMPANY. YOUR PROTEST APPEARS TO BE BASED UPON THE PREMISE THAT THE RATES FOR THESE SERVICES PRESENTLY BEING PAID BY AMERICAN POTASH AND CHEMICAL CORPORATION ARE SUBSTANTIALLY LESS THAN THOSE WHICH WILL BE AVAILABLE TO ANY OTHER PURCHASER OF THE PLANTS. HOWEVER, THE GENERAL SERVICES ADMINISTRATION HAS ADVISED THAT THE GOVERNMENT HAS NO ASSIGNABLE RIGHTS FOR WATER OR POWER. ADDENDUM NO. 3 THEREFORE ADVISES BIDDERS THAT THE GOVERNMENT HAS NO ASSIGNABLE RIGHTS AGAINST THE COLORADO RIVER COMMISSION OR BASIC MANAGEMENT, INC., AND AMENDS THE INVITATION TO DELETE ALL REFERENCES TO SUCH RIGHTS.

IN VIEW THEREOF, IT WOULD APPEAR THAT THE GOVERNMENT HAS NOTHING TO CONVEY IN THE FORM OF WATER OR POWER RIGHTS. THERE IS, OF COURSE, NO OBLIGATION OR AUTHORITY FOR THE GOVERNMENT TO ACQUIRE ADDITIONAL RIGHTS OR PROPERTY SOLEY FOR THE PURPOSE OF EQUALIZING A COMPETITIVE ADVANTAGE IN THE SALE OF SURPLUS PROPERTY. IN VIEW THEREOF, WE MUST CONCLUDE THAT THE ADVICE TO BIDDERS RELATIVE TO UTILITY SERVICES IS PROPER, AND THAT NO OBLIGATION TO EQUALIZE ANY COMPETITIVE ADVANTAGE WHICH MAY RESULT TO AMERICAN POTASH AND CHEMICAL CORPORATION THROUGH ITS PRESENT UTILITY AGREEMENTS CAN PROPERLY BE IMPOSED UPON THE GOVERNMENT.

CONCERNING THE REMOVAL OF GOVERNMENT-OWNED PROPERTY LOCATED INPLANT DOD NO. 217, A SCRAMBLED FACILITY, THE INVITATION ORIGINALLY PROVIDED AS FOLLOWS AT PAGE 4 OF EXHIBIT A:

"IT WILL BE INCUMBENT ON A PURCHASER OF THESE FACILITIES TO ENTER INTO A MUTUALLY ACCEPTABLE AGREEMENT WITH AMERICAN POTASH AND CHEMICAL CORPORATION FOR THE REMOVAL OF GOVERNMENT EQUIPMENT AND PROPERTY FROM THE AMERICAN POTASH AND CHEMICAL CORPORATION.'

IN VIEW OF THE FACT THAT THIS EQUIPMENT IS USED IN THE MANUFACTURE OF FEED STOCK FOR THE PRODUCTION OF AMMONIUM PERCHLORATE, YOU QUESTION WHETHER THIS CONDITION OF THE INVITATION IS COMPATIBLE WITH THE REQUIREMENT, PREVIOUSLY DISCUSSED, THAT A PROSPECTIVE PURCHASER MUST ENTER INTO AN AGREEMENT WITH THE DEPARTMENT OF THE NAVY THAT THERE WILL BE NO DISRUPTION OF PRODUCTION AT THE HENDERSON, NEVADA, FACILITY.

AS INDICATED ABOVE, ADDENDUM NO. 3 HAS REMOVED THE REQUIREMENT FOR UNINTERRUPTED PRODUCTION. ADDITIONALLY, THIS ADDENDUM HAS DELETED THE CONDITION WITH RESPECT TO AN AGREEMENT FOR REMOVAL WITH AMERICAN POTASH AND CHEMICAL CORPORATION, AS QUOTED ABOVE, AND HAS SUBSTITUTED THE OLLOWING:

"UPON THE PURCHASER'S REQUEST, AT A TIME CONSISTENT WITH THE PROVISIONS OF THE PARAGRAPH ENTITLED "SPECIAL CONDITIONS," HEREINBEFORE SET FORTH, THE GOVERNMENT WILL EFFECT THE REMOVAL AND DELIVERY OF THE GOVERNMENT EQUIPMENT AND PROPERTY INCLUDED IN THIS SALE AND LOCATED IN THE BUILDINGS AND THE PROPERTY OWNED BY THE AMERICAN POTASH AND CHEMICAL COMPANY. SUCH EQUIPMENT AND PROPERTY WILL BE DELIVERED BY THE GOVERNMENT TO ANY POINT SPECIFIED BY THE PURCHASER. THE COST OF SUCH REMOVAL AND SHIPMENT WILL BE AT THE PURCHASER'S EXPENSE.'

IT IS OUR OPINION THAT THESE AMENDMENTS REPRESENT A REASONABLE SOLUTION TO THE QUESTIONS RAISED BY THIS PORTION OF YOUR PROTEST AND, AS AMENDED, WE SEE NO BASIS FOR OBJECTION TO THESE PROVISIONS OF THE INVITATION. YOUR PROTEST ALSO CALLS ATTENTION TO THOSE PORTIONS OF THE INVITATION WHICH ADVISE BIDDERS THAT AMERICAN POTASH AND CHEMICAL CORPORATION IS ASSERTING PROPRIETARY RIGHTS IN CERTAIN PATENTED PROCESSES BEING UTILIZED IN ITS OPERATION OF THE PLANTS; THE ADVICE TO BIDDERS THAT NO AGREEMENT HAS BEEN REACHED WITH RESPECT TO THE GOVERNMENT'S RIGHT TO TRANSFER THE RIGHT TO USE SUCH PATENTED PROCESSES TO A PURCHASER OF THE PLANTS; THE GOVERNMENT'S SPECIFIC DISCLAIMER OF WARRANTY OF A PURCHASER'S RIGHTS TO USE SUCH PROCESSES; AND THE OBLIGATION IMPOSED UPON A PURCHASER TO INDEMNIFY THE GOVERNMENT AGAINST LIABILITY FOR INFRINGEMENT ARISING OUT OF USE OF SUCH PATENTED PROCESSES. IT IS OUR UNDERSTANDING THAT YOUR OBJECTION TO THESE PROVISIONS IS BASED UPON YOUR BELIEF THAT IN PRIOR SIMILAR DISPOSALS OF SURPLUS PROPERTY, THE GOVERNMENT HAS EXAMINED THOROUGHLY INTO THE CLAIMED PROPRIETARY RIGHTS, AND HAS EITHER WARRANTED A PURCHASER'S RIGHTS TO USE PATENTED PROCESSES OR ADVISED BIDDERS FULLY OF THE BASIS AND MERITS OF SUCH CLAIMS. WE UNDERSTAND YOUR OBJECTION TO THE GOVERNMENT'S FAILURE TO FOLLOW SUCH PROCEDURE WITH RESPECT TO THE CLAIMS OF AMERICAN POTASH AND CHEMICAL CORPORATION IS THAT IT PLACES BIDDERS IN A HIGHLY SPECULATIVE POSITION WITH RESPECT TO THEIR RIGHTS TO USE SUCH POTENTIAL PROCESSES IN OPERATING THE PLANT, AND MAY THEREFORE RESULT IN REDUCED BIDS AND AN UNFAIR COMPETITIVE ADVANTAGE TO THE PRESENT CONTRACTOR-OPERATOR.

THE PATENTS IN QUESTION, TOGETHER WITH THE CLAIMS OF THE GOVERNMENT AND AMERICAN POTASH AND CHEMICAL CORPORATION TO THEIR USE, ARE DESCRIBED AS FOLLOWS AT PAGE 3 OF EXHIBIT A TO THE INVITATION:

"PATENT NO. 2,739,873 - PROCESS FOR MAKING AMMONIUM PERCHLORATE. THE GOVERNMENT CONSIDERS THAT THE INVENTION COVERED BY THIS PATENT WAS CONCEIVED OR FIRST REDUCED TO PRACTICE UNDER EITHER CONTRACT NOA (A) 51- 1008-F OR CONTRACT NORD (F) 1740 BETWEEN THE DEPARTMENT OF THE NAVY AND AMERICAN POTASH COMPANY, AND ACCORDINGLY, THE GOVERNMENT IS LICENSED THEREUNDER IN ACCORDANCE WITH THE TERMS OF THOSE CONTRACTS. THIS LICENSE HAS BEEN ASSERTED AGAINST THE CONTRACTOR. IT WOULD PERMIT THE GOVERNMENT TO PRACTICE OR HAVE PRACTICED FOR THE GOVERNMENT THE INVENTION COVERED BY THIS PATENT. THIS LICENSE DOES NOT EXTEND TO MANUFACTURE FOR THE PURPOSE OF PROVIDING SUPPLIES TO THE GENERAL PUBLIC IN COMPETITION WITH THE CONTRACTOR. THE GOVERNMENT MAY, THEREFORE, HAVE THE INVENTION COVERED BY THIS PATENT PRACTICED FOR THE GOVERNMENT BY A THIRD PARTY. NO FORMAL TRANSFER OF A LICENSE TO A THIRD PARTY IS REQUIRED. AMERICAN POTASH HAS INFORMED THE GOVERNMENT THAT THE PROCESS WAS REDUCED TO PRACTICE PRIOR TO AND INDEPENDENTLY OF THE OPERATION OF THE PLANT.

"PATENT NOS. 2,511,516 - PROCESS FOR MAKING SODIUM CHLORATE AND 2,515,614 - ELECTROLYTIC CELL - TO THE EXTENT THAT THESE PATENTS ACTUALLY COVER THE PROCESS AND ELECTROLYTIC CELL FOR THE PRODUCTION OF SODIUM CHLORATE AT THIS PLANT, THE GOVERNMENT IS BELIEVED TO BE ENTITLED TO A LIMITED IMPLIED LICENSE UNDER THESE PATENTS. THIS LICENSE IS BELIEVED TO BE LIMITED (1) TO THE SPECIFIC EQUIPMENT BUILT FOR THE GOVERNMENT UNDER CONTRACT NORD (F) 1741 (NOA1111) AND (2) TO THE MANUFACTURE FOR THE GOVERNMENT OF SODIUM CHLORATE FOR THE PURPOSE CONTEMPLATED BY THAT CONTRACT ONLY. THIS IMPLIED LICENSE DOES NOT GO BEYOND THE USE OF THE EQUIPMENT IN THE MANNER CONTEMPLATED BY THE CONTRACT. THERE IS NO FORMAL INSTRUMENT OF LICENSE.

"PATENT NOS. 2,512,973 - PROCESS FOR MAKING PERCHLORATES AND 2,475,157 - ELECTROLYTIC APPARATUS - TO THE EXTENT THAT THESE PATENTS COVER THE PROCESS FOR THE PRODUCTION OF SODIUM PERCHLORATE FROM SODIUM CHLORATE AT THIS PLANT THE GOVERNMENT IS BELIEVED TO BE ENTITLED TO A LICENSE OF SIMILAR TYPE AND SCOPE AS SET FORTH IN THE PRECEDING PARAGRAPH. THIS PROCESS AND THE EQUIPMENT COVERED BY THESE PATENTS USE PLATINUM ELECTRODES. USE OF THE EQUIPMENT OR PERFORMANCE OF THE PROCESS WITHOUT USING THE PLATINUM ELECTRODES WOULD BE OUTSIDE THE SCOPE OF THESE PATENTS.'

TO THE EXTENT THAT THE GOVERNMENT MAY BE LICENSED TO USE THESE PATENTS, IT WOULD THEREFORE APPEAR THAT A PURCHASER OF THE PLANTS MAY ASSERT SUCH LICENSE IN ITS OPERATION OF THE PLANTS TO SUPPLY THE GOVERNMENT'S NEEDS. HOWEVER, THE GENERAL SERVICES ADMINISTRATION HAS ADVISED THAT IN VIEW OF A POSSIBLE CONFLICT ON SUCH RIGHTS IT WAS CONSIDERED DESIRABLE TO NOTIFY ALL PROSPECTIVE PURCHASERS OF POSSIBLE DEFECTS AND TO PROTECT THE GOVERNMENT BY INCLUDING THE USUAL INDEMNIFICATION PROVISIONS.

IT MAY WELL BE TO THE ADVANTAGE OF THE GOVERNMENT AND PROSPECTIVE BIDDERS IN SALES OF SURPLUS INDUSTRIAL PROPERTY INVOLVING PATENTED PROCESSES TO HAVE ALL QUESTIONS OF THE GOVERNMENT'S RIGHTS, AND THE RIGHTS OF THE PURCHASER OF SUCH PROPERTY, TO USE SUCH PROCESSES RESOLVED PRIOR TO SALE. HOWEVER, THE EXTENT TO WHICH SUCH QUESTIONS SHOULD BE RESOLVED, OR THE EXTENT TO WHICH THE GOVERNMENT SHOULD GRANT ASSURANCES TO SUCH PURCHASERS CONCERNING THE RIGHT TO USE PATENTED PROCESSES, IS A QUESTION WHICH WOULD APPEAR TO BE PECULIARLY WITHIN THE JURISDICTION OF THE DISPOSING AGENCY. WHERE, AS IN THE INSTANT CASE, THE DISPOSING AGENCY HAS OFFERED INDUSTRIAL PROPERTY FOR SALE WITHOUT WARRANTY AS TO A PURCHASER'S RIGHT TO USE PATENTED MANUFACTURING PROCESSES, THIS OFFICE IS WITHOUT AUTHORITY TO DIRECT FURTHER ASSURANCES TO PURCHASERS IN THE ABSENCE OF EVIDENCE THAT FACTS MATERIAL TO THE QUESTION OFA PURCHASER'S RIGHTS HAVE BEEN WITHHELD FROM PROSPECTIVE BIDDERS. THERE IS NO EVIDENCE THAT SUCH CIRCUMSTANCES EXIST IN CONNECTION WITH THIS SALE, NEITHER DO WE UNDERSTAND THAT YOUR PROTEST SO ALLEGES. IN VIEW THEREOF, WE ARE UNABLE TO CONCLUDE THAT THE PATENT PROVISIONS OF THE INVITATION ARE SO IMPROPER AS TO PRECLUDE SALE OF THE PLANTS ON THE BASIS SET OUT IN THE PATENT PROVISIONS OF THE INVITATION.

BASED UPON THE FOREGOING ANALYSIS OF THE VARIOUS TERMS AND CONDITIONS OF SALE IMPOSED BY THE INVITATION, AS AMENDED BY ADDENDUM NO. 3, IT IS OUR OPINION THAT SUCH TERMS AND CONDITIONS "PERMIT THAT FULL AND FREE COMPETITION WHICH IS CONSISTENT WITH THE VALUE AND NATURE OF THE PROPERTY INVOLVED," AS REQUIRED BY SECTION 203 (E) (2) (A) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, AS AMENDED, 72 STAT. 288. YOUR PROTEST AGAINST OFFERING THE PROPERTY IN QUESTION FOR SALE, AND AGAINST THE CONDITIONS OF SUCH SALE AS SET OUT IN IFB NO. GSA-UDS-9-LB-2, IS THEREFORE DENIED.