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B-178206, APR 4, 1973

B-178206 Apr 04, 1973
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A PROTEST BASED UPON ALLEGED IMPROPRIETIES IN A IFB WHICH ARE APPARENT PRIOR TO BID OPENING MUST BE FILED PRIOR TO BID OPENING. INC.: THIS IS IN REPLY TO YOUR TELEGRAM OF MARCH 16. YOUR PROTEST IS BASED ON TWO ALTERNATIVE GROUNDS. YOU CONTEND THERE WAS A FAILURE TO INCORPORATE INTO THE SOLICITATION A PATENT INDEMNIFICATION CLAUSE AS REQUIRED BY THE ARMED SERVICES PROCUREMENT REGULATION. AS A RESULT OF SUCH FAILURE YOU BELIEVE ANY AWARD TO A BIDDER WHO WILL INFRINGE A PATENT MAY NOT BE IN THE GOVERNMENT'S BEST INTEREST SINCE THE GOVERNMENT MAY ULTIMATELY BE REQUIRED TO PAY ROYALTIES FOR SUCH INFRINGEMENT. IN THE ALTERNATIVE YOU ARGUE THAT EVEN IF A PATENT INDEMNIFICATION CLAUSE WAS PROPERLY INCORPORATED INTO THE CONTRACT.

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B-178206, APR 4, 1973

BID PROTEST - IMPROPRIETIES APPARENT PRIOR TO BID OPENING - TIMELINESS OF FILING DECISION DENYING THE PROTEST OF DEMPSTER BROTHERS, INC. AGAINST THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER AN IFB ISSUED BY THE U.S. MARINE CORPS. A PROTEST BASED UPON ALLEGED IMPROPRIETIES IN A IFB WHICH ARE APPARENT PRIOR TO BID OPENING MUST BE FILED PRIOR TO BID OPENING. ALSO, IF A PROTEST HAS BEEN INITIALLY FILED WITH THE CONTRACTING AGENCY, ANY SUBSEQUENT PROTEST TO GAO MUST BE FILED WITHIN 5 DAYS OF NOTIFICATION OF ADVERSE AGENCY ACTION. 4 CFR 20.2(A).

TO DEMPSTER BROTHERS, INC.:

THIS IS IN REPLY TO YOUR TELEGRAM OF MARCH 16, 1973, PROTESTING THE CONTRACT AWARDED TO ANOTHER BIDDER UNDER IFB M67001-73-B-0029, ISSUED BY THE MARINE CORPS, PURCHASING AND CONTRACTING BRANCH, CAMP LEJEUNE, NORTH CAROLINA.

ESSENTIALLY, YOUR PROTEST IS BASED ON TWO ALTERNATIVE GROUNDS. FIRST, YOU CONTEND THERE WAS A FAILURE TO INCORPORATE INTO THE SOLICITATION A PATENT INDEMNIFICATION CLAUSE AS REQUIRED BY THE ARMED SERVICES PROCUREMENT REGULATION. AS A RESULT OF SUCH FAILURE YOU BELIEVE ANY AWARD TO A BIDDER WHO WILL INFRINGE A PATENT MAY NOT BE IN THE GOVERNMENT'S BEST INTEREST SINCE THE GOVERNMENT MAY ULTIMATELY BE REQUIRED TO PAY ROYALTIES FOR SUCH INFRINGEMENT. IN THE ALTERNATIVE YOU ARGUE THAT EVEN IF A PATENT INDEMNIFICATION CLAUSE WAS PROPERLY INCORPORATED INTO THE CONTRACT, THE SUCCESSFUL BIDDER FAILED TO INCLUDE THE EXPENSE OF ROYALTIES IN ITS PRICING.

STANDARDS APPLICABLE TO THE TIMELINESS OF PROTESTS ARE PROVIDED IN SECTION 20.2(A) OF OUR BID PROTEST PROCEDURES AND STANDARDS (4 CFR 20.2(A)), IN PERTINENT PART AS FOLLOWS:

(A) *** PROTESTS BASED UPON ALLEGED IMPROPRIETIES IN ANY TYPE OF SOLICITATION WHICH ARE APPARENT PRIOR TO BID OPENING OR THE CLOSING DATE FOR RECEIPT OF PROPOSALS SHALL BE FILED PRIOR TO BID OPENING OR THE CLOSING DATE FOR RECEIPT OF PROPOSALS. *** IF A PROTEST HAS BEEN FILED INITIALLY WITH THE CONTRACTING AGENCY, ANY SUBSEQUENT PROTEST TO THE GENERAL ACCOUNTING OFFICE FILED WITHIN 5 DAYS OF NOTIFICATION OF ADVERSE AGENCY ACTION WILL BE CONSIDERED PROVIDED THE INITIAL PROTEST TO THE AGENCY WAS MADE TIMELY. ***

AS TO YOUR CONTENTIONS WHICH ARE PREMISED UPON THE ALLEGED FAILURE TO INCLUDE THE REQUIRED PATENT INDEMNITY CLAUSE, WE BELIEVE SUCH FAILURE SHOULD HAVE BEEN APPARENT PRIOR TO JANUARY 15, 1973, THE BID OPENING DATE. YOUR PROTEST WAS THEREFORE REQUIRED TO BE FILED BEFORE BID OPENING AND YOU APPARENTLY MADE NO ATTEMPT TO DO SO UNTIL YOUR LETTER OF FEBRUARY 5, 1973, TO THE CONTRACTING OFFICER. EVEN IF THIS MATTER HAD BEEN TAKEN UP WITH THE CONTRACTING AGENCY PRIOR TO BID OPENING, WE BELIEVE A PROTEST SHOULD HAVE BEEN FILED WITH THIS OFFICE NO LATER THAN 5 DAYS AFTER BID OPENING WHEN IT SHOULD HAVE BEEN APPARENT THAT SUCH PROCUREMENT ACTION WAS ADVERSE TO YOUR POSITION. 52 COMP. GEN. 20, 22 (1972). ACCORDINGLY, NO DECISION WILL BE RENDERED ON THIS ASPECT OF YOUR PROTEST.

REGARDING THE POSSIBLE FAILURE OF THE SUCCESSFUL BIDDER TO INCLUDE THE EXPENSE OF ROYALTIES IN ITS PRICING IF IT IS ASSUMED THAT A PATENT INDEMNIFICATION CLAUSE WAS INCLUDED IN THE CONTRACT, WE DO NOT CONSIDER THIS TO BE A VALID BASIS FOR PROTESTING. WHILE SUCH A CONTRACTOR ASSUMES THE RISK OF PATENT INFRINGEMENT AND WOULD BE OBLIGATED TO REIMBURSE THE GOVERNMENT FOR ANY INFRINGEMENT COSTS IT MAY BE REQUIRED TO PAY, THE POSSIBILITY THAT SUCH REIMBURSEMENT MIGHT RESULT IN FAILURE OF THE CONTRACTOR TO REALIZE A PROFIT AT HIS BID PRICE AFFORDS NO BASIS FOR REJECTING HIS BID.

FOR THE REASONS STATED ABOVE, WE WILL TAKE NO FURTHER ACTION IN THIS MATTER.

ENCLOSED FOR YOUR INFORMATION IS A COPY OF A RECENT DECISION OF THIS OFFICE, B-178124, MARCH 9, 1973, WHEREIN WE CONCLUDED THAT GOVERNMENT CONTRACTS SHOULD NOT BE RESTRICTED TO PATENT HOLDERS AND THEIR LICENSEES.

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