B-145256, AUGUST 9, 1961, 41 COMP. GEN. 93

B-145256, AUGUST 9, 1961, 41 COMP. GEN. 93

CONTRACTS - SPECIFICATIONS - QUALIFIED PRODUCTS - LISTING - ADVERTISING PROCEDURE A LOW BIDDER WHO CONTINUES TO OFFER AN UNQUALIFIED PRODUCT IN RESPONSE TO SOLICITATIONS UNDER INVITATIONS, WHICH AUTOMATICALLY ENTITLED THE LOWEST BIDDER OFFERING A QUALIFIED PRODUCT TO RECEIVE FIRST CONSIDERATION FOR AWARD, OR RESERVED THE RIGHT IN THE PROCURING AGENCY TO AWARD THE CONTRACT TO THE QUALIFIED PRODUCT BIDDER, HAS BEEN AFFORDED AMPLE OPPORTUNITY TO HAVE HIS PRODUCT QUALIFIED AND HAS NOT, THEREFORE, BEEN DISCRIMINATED AGAINST IN THE PROCUREMENT. ALTHOUGH AN AWARD TO THE ONLY BIDDER OFFERING A QUALIFIED PRODUCT LIST ITEM IN RESPONSE TO AN INVITATION WHICH AUTOMATICALLY ENTITLED THE QUALIFIED PRODUCT BIDDER TO FIRST CONSIDERATION AS AGAINST THE BIDDER OFFERING THE UNQUALIFIED PRODUCT AT A LOWER PRICE IS TANTAMOUNT TO A PROCUREMENT FROM A SOLE SOURCE UNDER A FORMALLY ADVERTISED PROCUREMENT, SUCH AN AWARD WHEN NEITHER THE PROCURING AGENCY NOR THE ONLY QUALIFIED BIDDER HAD ANY KNOWLEDGE THAT SOME OTHER MANUFACTURER WOULD NOT HAVE HIS PRODUCT QUALIFIED IN TIME FOR CONSIDERATION AND WHEN THE QUALIFIED PRODUCT BIDDER WAS NOT IN ANY POSITION TO INFLATE ITS BID PRICE IS NOT LEGALLY OBJECTIONABLE. WHERE ONLY ONE CONCERN HAS QUALIFIED AS A MANUFACTURER OF THE PRODUCT UNDER A FORMALLY ADVERTISED INVITATION AND WHERE THE TIME BETWEEN THE DATE THE INVITATION IS TO BE ISSUED AND THE DATE THE BIDS ARE TO BE OPENED IS INSUFFICIENT TO ENABLE OTHER POTENTIAL SUPPLIERS TO OBTAIN QUALIFICATIONS OF THEIR PRODUCTS, THE QUALIFIED PRODUCT SHOULD BE PROCURED BY NEGOTIATION RATHER THAN BY COMPETITIVE BIDDING.

TO LEWIS, MACDONALD AND VARIAN, AUGUST 9, 1961:

REFERENCE IS MADE TO YOUR LETTER OF MAY 12, 1961, RELATIVE TO OUR LETTER DATED MAY 10, 1961, WHEREIN WE ADVISED THAT WE FOUND NO BASIS TO QUESTION THE ACTION OF THE FEDERAL AVIATION AGENCY, AERONAUTICAL CENTER, OKLAHOMA CITY, OKLAHOMA, IN AWARDING A CONTRACT TO EITEL MCCULLOUGH, INC., EIMAC), INSTEAD OF TO GENERAL ELECTRONICS, INC., FOR ITEM NO. 314 (DESCRIBED AS ELECTRON TUBE TYPE 4-65A) UNDER THE AGENCY'S INVITATION FOR BIDS NO. 115-3 -70.

THE INVITATION, ISSUED JANUARY 9, 1961, FOR BIDS TO BE OPENED JANUARY 26, 1961, COVERED REQUIREMENTS FOR 588 DIFFERENT ITEMS OF ELECTRON TUBES AND SEMICONDUCTORS FOR A PERIOD FROM THE DATE OF AWARD THROUGH SEPTEMBER 30, 1961, AND IT PROVIDED FOR BIDS ON TUBES MEETING MILITARY SPECIFICATIONS ( JAN OR MIL) OR COMMERCIAL SPECIFICATIONS, OR BOTH. HOWEVER, PARAGRAPH VI OF THE TERMS AND CONDITIONS THEREOF PROVIDED THAT BIDS OFFERING TO FURNISH TUBES CONFORMING TO COMMERCIAL SPECIFICATIONS WOULD BE CONSIDERED FOR AWARD ONLY IF NO BID WAS RECEIVED OFFERING A TUBE CONFORMING TO MILITARY SPECIFICATIONS AND CURRENTLY ON THE MILITARY SPECIFICATION QUALIFIED PRODUCTS LIST FOR THE TYPE OFFERED.

YOUR LETTER IS, IN MATERIAL PART, AS FOLLOWS:

I AM INFORMED BY MR. GASPARIK, PRESIDENT OF GENERAL ELECTRONICS, INC., THAT PRIOR TO THE ANNUAL PROCUREMENT OF TUBES BY THE F.A.A.FOR THE YEAR 1959, MR. GASPARIK PROTESTED TO THE BUYERS AND CONTRACTING PERSONNEL IN OKLAHOMA ( MESSRS. JOSEPH BOWIE, JOHNSON AND HAM) THE EXERCISE OF DISCRETION BY THAT AGENCY, TO AWARD CONTRACTS FOR THIS TUBE TYPE, TO A SOLE SOURCE, Q.A.

TWO WEEKS PRIOR TO THE OPENING OF BIDS SUBMITTED PURSUANT TO SUBJECT INVITATION, MR. GASPARIK, AT THE REQUEST OF F.A.A. PERSONNEL, TRAVELED TO OKLAHOMA, AND CONFERRED ON THIS SUBJECT WITH THE PREVIOUSLY MENTIONED MESSRS. BOWIE, JOHNSON AND HAM. HE OBJECTED TO PARAGRAPH VI OF THE IFB ON THE GROUNDS THAT THE QPL CONTAINED ONLY ONE SUPPLIER, NAMELY EIMAC AND THAT THIS CONSTITUTED A SOLE SOURCE PROCUREMENT IF ELIMAC BID. HE WAS ADVISED THAT DISCRETION WAS ELIMINATED IN PARAGRAPH VI, IN ORDER TO OFFSET THE OBJECTION HE HAD RAISED IN THE PRIOR YEAR TO THE EXERCISE OF DISCRETION. HE OBJECTED, AGAIN, BUT NONETHELESS SUBMITTED A BID FOR HIS COMPANY IN THE HOPE OF GETTING A CONTRACT.

WHEN THE BIDS WERE OPENED AND GENERAL ELECTRONICS WAS LOW, HE WAS INFORMED HE WOULD NOT GET THE CONTRACT BECAUSE EIMAC HAD BID, THOUGH CONSIDERABLY HIGHER. PROTEST WAS MADE TO THE ADMINISTRATIVE AGENCY BY THIS OFFICE AFTER THE OPENING OF BIDS, BUT PRIOR TO AN AWARD OF CONTRACT. PROTEST WAS MADE BY THE COMPANY AS HAS BEEN HERETOFORE DESCRIBED, PRIOR TO THE ISSUANCE OF THE IFB AND PRIOR TO THE OPENING OF BIDS.

THE NUB OF OUR CONTENTION HERE IS NOT THAT WE OBJECT TO A "QUALIFIED PRODUCTS METHOD OF PROCUREMENT," OR QUESTION THE LEGALITY OF QPL METHODS, AS IS SUGGESTED IN PARAGRAPH 3 OF YOUR LETTER DATED MAY 10; BUT, RATHER, IN OUR OPINION, AN AWARD OF CONTRACT TO A SOLE SOURCE, PURSUANT TO IFB, BY THE TECHNIQUE OF INVITING NUMEROUS BIDS, THOUGH AWARDING THE CONTRACT ONLY TO THE ONE SUPPLIER WITH Q.A., WHATEVER HE BID, IS ANTITHETICAL TO THE PRINCIPLE OF COMPLETION, AND NOT IN THE BEST INTERESTS OF THE UNITED STATES. THE GOVERNMENT LOSES THE ADVANTAGE OF NEGOTIATION WITH THE SOLE SOURCE BY THIS TECHNIQUE.

FOR ALL OF THE FOREGOING REASONS, IT IS OUR OPINION THAT THE F.A.A. WAS ON NOTICE THAT PROCUREMENT FROM SOLE SOURCE, BY THIS TECHNIQUE, WAS CONSIDERED BY THIS CONTRACTOR TO BE IMPROPER, BOTH BEFORE THE ISSUANCE OF THE IFB, BEFORE THE OPENING OF BIDS AND BEFORE THE AWARD. SINCE IT WOULD APPEAR THAT THIS PROCUREMENT TECHNIQUE IS IN FACT IMPROPER, AND SINCE F.A.A. HAD SUFFICIENT NOTICE OF THE IMPROPRIETY THEY WERE COMMITTING IT IS REQUESTED THAT APPROPRIATE ACTION BE TAKEN TO CORRECT THIS IMPROPER RESULT.

IN FEDERAL AVIATION AGENCY'S LETTER OF MARCH 1, 1961, TO YOU, AS ATTORNEYS FOR GENERAL ELECTRONICS, INC., DENYING THE COMPANY'S PROTEST IN THIS MATTER, IT WAS STATED:

IT IS THE POLICY OF THE FEDERAL AVIATION AGENCY THAT ITS PERSONNEL CAN BEST BE UTILIZED IN ACTIVITIES OTHER THAN INSPECTION AND ACCEPTANCE OF ELECTRON TUBES AT THE MANUFACTURING PLANTS. THEREFORE, IT IS DETERMINED ESSENTIAL AND IN THE BEST INTERESTS OF THIS AGENCY THAT FIRST CONSIDERATION BE GIVEN ONLY TO THOSE TUBES CONFORMING TO MILITARY ( JAN OR MIL) SPECIFICATIONS AND CURRENTLY ON THE MILITARY SPECIFICATIONS QUALIFIED PRODUCTS LIST.

DURING THE PAST SEVERAL YEARS THIS AGENCY HAS CONFORMED TO POLICY OF THE PRECEDING PARAGRAPH IN AWARDS OF CONTRACTS FOR ELECTRON TUBES. SPECIFICALLY, THE TUBE IN QUESTION, TYPE 4-65A, HAS BEEN INCLUDED IN THESE PAST PROCUREMENTS. GENERAL ELECTRONICS, INCORPORATED, AS WELL AS OTHERS REGULARLY ENGAGED IN THE MANUFACTURE OF TRANSMITTING-TYPE ELECTRON TUBES, HAVE BEEN AWARE OF THIS AGENCY'S PAST REQUIREMENTS FOR TUBE TYPE 4-65A AND HAVE HAD AMPLE TIME TO SECURE QUALIFICATION APPROVAL. ALSO, IN THE AGENCY'S LETTER OF APRIL 11, 1961, FURNISHING A REPORT TO US IN THIS MATTER, IT WAS STATED:

THIS IFB NO. 115-3-70 IS NOT A FIRST PROCUREMENT OF THIS TUBE TYPE. DURING THE PAST THREE YEARS THIS AGENCY HAS ISSUED INVITATIONS FOR BIDS FOR THIS ELECTRON TUBE BASED ON QUALIFICATION APPROVAL AND GENERAL ELECTRONS WAS SOLICITED EACH TIME. * * *

IT THUS APPEARS FROM THE INFORMATION CONTAINED IN THE ABOVE QUOTATIONS FROM YOUR AND THE AGENCY'S LETTERS TAKEN COLLECTIVELY THAT THE PREVIOUS INVITATIONS ISSUED BY FAA, COVERING REQUIREMENTS FOR DIFFERENT ITEMS OF ELECTRON TUBES, INCLUDING TUBE TYPE 4-65A, HAD REQUESTED BIDS FOR TUBES MEETING MILITARY SPECIFICATIONS OR COMMERCIAL SPECIFICATIONS BUT BIDDERS HAD BEEN ADVISED THEREIN THAT THE AGENCY RESERVED THE RIGHT TO AWARD THE CONTRACT FOR A PARTICULAR ITEM OR ITEMS TO BIDDERS OFFERING A TUBE CONFORMING TO MILITARY SPECIFICATIONS AND CURRENTLY ON THE MILITARY QUALIFIED PRODUCTS LIST FOR THE TYPE OFFERED. IT FURTHER APPEARS THEREFROM THAT THE AGENCY'S ACTION IN INCORPORATING THE PROVISIONS OF PARAGRAPH VI IN THE INSTANT INVITATION, WHICH AUTOMATICALLY ENTITLED THE LOWEST BIDDER OFFERING A QUALIFIED PRODUCT TO RECEIVE FAVORABLE CONSIDERATION FOR AWARD AS AGAINST A BIDDER OFFERING AN UNQUALIFIED PRODUCT AT A LOWER PRICE, THUS ELIMINATING THE DISCRETION WHICH THE AGENCY FORMERLY HAD IN THIS RESPECT, WAS ATTRIBUTABLE IN PART, AT LEAST, TO THE EARLIER OBJECTION WHICH GENERAL ELECTRONICS HAD RAISED TO THE AGENCY'S RESERVATION OF THIS DISCRETION IN ITS INVITATIONS.

SINCE EITEL-MCCULLOUGH, INC., IS SHOWN ON MILITARY QUALIFIED PRODUCTS LIST 1-29, ELECTRON TUBES AND CRYSTAL RECTIFIERS, DATED MARCH 1, 1960, TO BE THE ONLY CONCERN WHOSE ELECTRON TUBE TYPE 4-65A HAD BEEN APPROVED AS A QUALIFIED PRODUCT UNDER MILITARY SPECIFICATION MIL-E-1 AS OF THAT DATE, IT IS ASSUMED THAT EIMAC RECEIVED THE AWARD FOR TUBE TYPE 4-65A UNDER THE PREVIOUS INVITATIONS ISSUED BY FAA, IN VIEW OF THE AGENCY'S STATEMENT THAT, IN AWARDING CONTRACTS FOR ELECTRONIC TUBES, INCLUDING TYPE 4-65A, IT HAD FOLLOWED THE POLICY OF GIVING FIRST CONSIDERATION TO BIDS OFFERING TUBES CONFORMING TO MILITARY ( JAN OR MIL) SPECIFICATIONS AND CURRENTLY ON THE MILITARY SPECIFICATIONS QUALIFIED PRODUCTS LIST. HOWEVER, SINCE IT APPEARS FROM FAA'S LETTER OF APRIL 11, 1961, THAT GENERAL ELECTRONICS "WAS SOLICITED EACH TIME" UNDER THESE EARLIER INVITATIONS WHICH RESERVED THE RIGHT IN THE AGENCY TO AWARD THE CONTRACT FOR A PARTICULAR ITEM OR ITEMS TO BIDDERS OFFERING A QUALIFIED PRODUCT, IT IS APPARENT THAT GENERAL ELECTRONICS HAS BEEN AFFORDED AMPLE OPPORTUNITY TO HAVE ITS PRODUCT QUALIFIED AND THAT IT HAS NOT, THEREFORE, BEEN DISCRIMINATED AGAINST IN THE MATTER OF THE PROCUREMENT.

IT IS QUITE TRUE THAT, AS IT TURNED OUT, THE ITEM INVOLVED WAS PROCURED FROM A SOLE SOURCE THROUGH THE MEDIUM OF FORMAL ADVERTISING, BUT NEITHER EIMAC NOR THE RESPONSIBLE OFFICIALS OF FAA HAD ANY WAY OF KNOWING THAT SOME OTHER MANUFACTURER OF TUBE TYPE 4-65A WOULD NOT HAVE ITS PRODUCT QUALIFIED WITHIN THE TIME REQUIRED TO HAVE ITS BID CONSIDERED UNDER THE INVITATION. EIMAC MAY NOT, THEREFORE, BE SAID TO HAVE BEEN IN A POSITION TO INFLATE ITS BID BECAUSE OF THE KNOWLEDGE THAT IT WAS TO HAVE NO COMPETITION. UNDER THE CIRCUMSTANCES, THE AWARD OF THE CONTRACT TO EIMAC FOR ITEM 314 UNDER THE INVITATION APPEARS LEGALLY UNOBJECTIONABLE.

IT MAY BE OBSERVED THAT, IF THE CONTRACTING OFFICER CONSIDERED THAT THE BID SUBMITTED BY EIMAC WAS UNREASONABLE, HE WAS IN A POSITION TO PROTECT THE GOVERNMENT'S INTEREST. SUBPART 1-2.3--- OPENING OF BIDS AND AWARD OF CONTRACT, OF THE FEDERAL PROCUREMENT REGULATIONS, EFFECTIVE DECEMBER 1, 1960, PROVIDES IN PERTINENT PART AS FOLLOWS: 1 2.404 REJECTION OF BIDS. -2.404-1 CANCELLATION OF INVITATION AFTER OPENING.

(A) PRESERVATION OF THE INTEGRITY OF THE COMPETITIVE BID SYSTEM DICTATES THAT, AFTER BIDS HAVE BEEN OPENED, AWARD MUST BE MADE TO THAT RESPONSIBLE BIDDER WHO SUBMITTED THE LOWEST RESPONSIVE BID, UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND CANCEL THE INVITATION. * * *

* * * * * * * 1 2.404-2 REJECTION OF INDIVIDUAL BIDS.

(C) ANY BID MAY BE REJECTED IF THE CONTRACTING OFFICER DETERMINES IN WRITING THAT IT IS UNREASONABLE AS TO PRICE. ( ITALICS SUPPLIED.)

NOTWITHSTANDING THAT THE CONTRACTING OFFICER WAS NOT PLACED IN A POSITION WHERE HE COULD NOT PROTECT THE GOVERNMENT'S INTEREST IN THE EVENT THE BID OF EIMAC WAS CONSIDERED TO HAVE BEEN UNREASONABLE, WE AGREE WITH YOU THAT IT WOULD SEEM TO BE SOUNDER PROCUREMENT POLICY FOR AN AGENCY TO PROCURE A QUALIFIED PRODUCT BY MEANS OF NEGOTIATION IN THE FIRST PLACE WHERE, AS IN THIS CASE, ONLY ONE CONCERN IS SHOWN TO HAVE QUALIFIED AS A MANUFACTURER OF THE PRODUCT AT THE TIME THE INVITATION IS BEING PREPARED, PARTICULARLY WHERE NOT ENOUGH TIME IS TO BE ALLOWED BETWEEN THE DATE THE INVITATION IS TO BE ISSUED AND THE DATE BIDS ARE TO BE OPENED WITHIN WHICH TO ENABLE OTHER POTENTIAL SUPPLIERS TO OBTAIN QUALIFICATION OF THEIR PRODUCT.

A COPY OF THIS LETTER IS BEING FURNISHED TO THE ADMINISTRATOR OF THE FEDERAL AVIATION AGENCY.