B-143259, AUG. 18, 1960

B-143259, AUG. 18, 1960

TO KECO INDUSTRIES, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JUNE 22, 1960, PROTESTING AGAINST THE ACTION OF THE DEPARTMENT OF THE ARMY IN NEGOTIATING A CONTRACT UNDER THE PROVISIONS OF 10 U.S.C. 2304 (A) (14) WITH STRATOS DIVISION OF FAIRCHILD ENGINE AND AIRPLANE CORPORATION FOR 38,000 BTU/BR 400 CYCLE AIR CONDITIONERS.

CLAUSE (14) OF 10 U.S.C. 2304 (A) PROVIDES THAT THE HEAD OF AN AGENCY MAY NEGOTIATE A CONTRACT IF "THE PURCHASE OR CONTRACT IS FOR TECHNICAL OR SPECIAL PROPERTY THAT HE DETERMINES TO REQUIRE A SUBSTANTIAL INITIAL INVESTMENT OR AN EXTENDED PERIOD OF PREPARATION FOR MANUFACTURE, AND FOR WHICH HE DETERMINES THAT FORMAL ADVERTISING AND COMPETITIVE BIDDING MIGHT REQUIRE DUPLICATION OF INVESTMENT OR PREPARATION ALREADY MADE OR WOULD UNDULY DELAY THE PROCUREMENT OF THAT PROPERTY.'

THE RECORDS OF THE DEPARTMENT OF THE ARMY INDICATE THAT THE AIR CONDITIONERS IN QUESTION WERE DEVELOPED BY STRATOS UNDER A DEVELOPMENT CONTRACT AWARDED IN 1957. IN OCTOBER 1958, FOLLOWING FORMAL ADVERTISING FOR BIDS, A PRODUCTION CONTRACT FOR 42 UNITS WAS AWARDED TO EASTERN INDUSTRIES, BUT THIS CONTRACT WAS TERMINATED IN DECEMBER 1958 AFTER IT BECAME APPARENT THAT THE CONTRACTOR WOULD BE UNABLE TO MEET THE SPECIFICATIONS OR THE REQUIRED DELIVERY SCHEDULE.

FOLLOWING TERMINATION OF THIS CONTRACT, RAYTHEON, THE MISSILE SYSTEM CONTRACTOR, PURCHASED 40 UNITS FROM U.S. THERMO CONTROL OF MINNEAPOLIS. HOWEVER, THESE UNITS WERE NOT SATISFACTORY FOR TACTICAL USE BECAUSE OF THEIR EXCESS WEIGHT AND WERE PROCURED FOR TEMPORARY USE UNTIL THE DEPARTMENT OF THE ARMY COULD PROVIDE UNITS MEETING THE REQUIREMENTS OF THE MISSILE SYSTEM. IN MARCH 1959 A CONTRACT FOR THE PRODUCTION OF 247 UNITS WAS THEREFORE NEGOTIATED WITH STRATOS UNDER 10 U.S.C. 2304 (A) (14) PURSUANT TO A CLASS DETERMINATION AND FINDINGS AUTHORIZING NEGOTIATION FOR ITEMS REQUIRED FOR THE HAWK MISSILE SYSTEM. THE QUANTITY REQUIRED UNDER THIS CONTRACT WAS INCREASED BY 40 UNITS IN FEBRUARY 1960.

THE LATEST PROCUREMENT OF THESE ITEMS, TO WHICH YOUR PROTEST IS DIRECTED, ARISES OUT OF REQUIREMENTS UNDER THE HAWK AND PERSHING MISSILE PROGRAMS FOR DELIVERIES FROM OCTOBER 1960 TO JULY 1961. THE ORIGINAL PURCHASE REQUEST DATED MARCH 3, 1960, ON THESE REQUIREMENTS COVERED 177 UNITS, AND AMENDMENTS 1 THROUGH 3, DATED APRIL 4, MAY 20, AND JUNE 6, 1960, INCREASED THE QUANTITY TO 258 UNITS. ON APRIL 9, 1960, A REQUEST FOR PROPOSALS ON 194 UNITS WAS ISSUED TO STRATOS WITH SUBSEQUENT AMENDMENTS INCREASING THE QUANTITY TO 258 UNITS. FOLLOWING ISSUANCE OF AMENDMENT NO. 3 TO THE PURCHASE REQUEST ON JUNE 6, 1960, THE CHIEF OF ENGINEERS REVIEWED THE PROCUREMENT TO DETERMINE WHICH OF THE CIRCUMSTANCES SET FORTH IN PART 2, SECTION III OF ASPR AND APP WAS MOST CLEARLY APPLICABLE AS AUTHORITY TO NEGOTIATE. BASED UPON SUCH REVIEW IT WAS HIS OPINION THAT NEGOTIATION OF THE SUBJECT PROCUREMENT WAS JUSTIFIED UNDER THE CIRCUMSTANCES SET FORTH IN ASPR 3-210.2 (XIII), VIZ., "WHEN IT IS IMPOSSIBLE TO DRAFT, FOR A SOLICITATION OF BIDS, ADEQUATE SPECIFICATIONS OR ANY OTHER ADEQUATELY DETAILED DESCRIPTION OF THE REQUIRED SUPPLIES OR SERVICES.' HOWEVER, ASPR 3-210.3 PROVIDES THAT "THE AUTHORITY OF THIS PARAGRAPH 3-210 (SUPPLIES OR SERVICES FOR WHICH IT IS IMPRACTICABLE TO SECURE COMPETITION BY FORMAL ADVERTISING) SHALL NOT BE USED WHEN NEGOTIATION IS AUTHORIZED BY ANY OTHER AUTHORITY SET FORTH IN ASPR 3-201 THROUGH 3-217, EXCEPT THAT THIS AUTHORITY SHALL BE USED IN PREFERENCE TO ASPR 3-212.' ACCORDINGLY, SINCE NEGOTIATION WAS AUTHORIZED UNDER ASPR 3-214, IT WAS CONSIDERED INAPPROPRIATE TO USE ASPR 3-210 AND, ON JUNE 7, 1960, THE CHIEF OF ENGINEERS SUBMITTED TO ASA/LOG) A REQUEST FOR AUTHORITY TO NEGOTIATE WITH STRATOS UNDER 10 U.S.C. 2304 (A) (14) AND ASPR 3-214 TO FILL THE REQUIREMENT.

A DETERMINATION TO NEGOTIATE WITH STRATOS UNDER 10 U.S.C. 2304 (A) (14) AND ASPR 3-214 WAS ISSUED BY THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS) ON JUNE 16, 1960, SUCH DETERMINATION BEING JUSTIFIED BY THE FOLLOWING FINDINGS:

"/1) THE ITEM TO BE PROCURED IS COMPLICATED, HIGHLY TECHNICAL, SPECIAL EQUIPMENT WITH MILITARY CHARACTERISTICS AND DESIGN DETAILS WHICH ARE FAMILIAR TO THE RESEARCH AND DEVELOPMENT CONTRACTOR.

"/2) STRATOS DIVISION OF FAIRCHILD ENGINE AND AIRPLANE CORPORATION DEVELOPED THE ITEM AND IS THE ONLY FIRM WHICH HAS PRODUCED SATISFACTORY 38,000 BTU AIR CONDITIONERS FOR MISSILE APPLICATION. THIS FIRM IS CURRENTLY IN PRODUCTION. APPROXIMATELY ONE YEAR WAS EXPENDED IN DEVELOPMENT.

"/3) DELIVERIES ARE REQUIRED STARTING IN OCTOBER 1960.

"/4) SUPPLIERS OTHER THAN STRATOS WOULD BE UNABLE TO PRODUCE SATISFACTORY AIR CONDITIONERS WITHOUT AN EXTENDED PERIOD OF PREPARATION FOR MANUFACTURE WHICH WOULD UNDULY DELAY PROCUREMENT.'

BASED UPON SUCH DETERMINATION AND FINDINGS CONTRACT NO. DA-11-184 ENG- 18106 WAS NEGOTIATED WITH AND AWARDED TO STRATOS ON JUNE 17, 1960.

WHILE THE PROCUREMENT HISTORY OF THESE AIR CONDITIONERS SINCE THEIR DEVELOPMENT WOULD APPEAR TO RAISE SEVERAL QUESTIONS WITH RESPECT TO THE PROCUREMENT MANAGEMENT PRACTICES FOLLOWED, OUR EXAMINATION OF THE RECORDS PRESENTLY BEFORE US INDICATES THAT THE REQUIREMENTS OF BOTH 10 U.S.C. 2304 (A) (14) AND THE ARMED SERVICES PROCUREMENT REGULATION HAVE BEEN COMPLIED WITH IN NEGOTIATING THE LATEST CONTRACT FOR THESE ARTICLES WITH STRATOS. UNDER THE PROVISIONS OF 10 U.S.C. 2310, THE FINDINGS AND DETERMINATIONS ISSUED BY AN ASSISTANT SECRETARY TO AUTHORIZE THE NEGOTIATION OF A CONTRACT UNDER SECTION 2304 (A) (14) ARE FINAL, AND THIS OFFICE HAS NO AUTHORITY TO SUBSTITUTE ITS JUDGMENT FOR THAT OF THE CONTRACTING AGENCY OR TO REFUSE TO RECOGNIZE THE VALIDITY OF A CONTRACT NEGOTIATED PURSUANT TO SUCH DETERMINATION.

IT WOULD THEREFORE APPEAR THAT THERE IS NO BASIS UPON WHICH THIS OFFICE WOULD BE AUTHORIZED TO DIRECT CANCELLATION OF THE CONTRACT AWARDED TO STRATOS. TO THE EXTENT THAT YOUR PROTEST IS DIRECTED TO SUCH ACTION BY THIS OFFICE, IT MUST THEREFORE BE DENIED.

YOU ARE ADVISED, HOWEVER, THAT THE NEGOTIATION PRACTICES OUTLINED IN YOUR PROTEST WILL BE CONSIDERED IN OUR AUDIT OF THE CONTRACTING INSTALLATION. IN THE EVENT SUCH AUDIT INDICATES THAT THE PRACTICES FOLLOWED REPRESENT AN ABUSE OF THE NEGOTIATION AUTHORITY OR ARE CLEARLY NOT IN THE PUBLIC INTEREST, THEY WILL BE MADE THE SUBJECT OF A REPORT BY THIS OFFICE TO THE CONGRESS.