B-113845, OCTOBER 15, 1954, 34 COMP. GEN. 180

B-113845: Oct 15, 1954

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A BID WHICH COMPLIES WITH THE SPECIFICATIONS AS ADVERTISED BUT IS ACCOMPANIED BY A SAMPLE WHICH FAILS TO MEET SUCH SPECIFICATIONS MUST BE TAKEN AS QUALIFIED BY THE SAMPLE AND IS REQUIRED TO BE REJECTED AS UNRESPONSIVE. 1954: REFERENCE IS MADE TO LETTER DATED AUGUST 25. WERE DELETED THEREFROM. THE INVITATION FURTHER PROVIDED THAT A BID SAMPLE WAS REQUIRED FOR THE ITEM. FOR THE DETAILS OF WHICH BIDDERS WERE REFERRED TO INSTRUCTION SHEET NO. 1 OF THE INVITATION. ON THAT SHEET BIDDERS WERE ADVISED AS FOLLOWS: BID SAMPLE MUST BE FURNISHED FOR TEST AND EVALUATION. (D) ANY SAMPLE FAILING IN ANY PORTION OF TESTS WILL BE DEEMED SUFFICIENT BASIS FOR REJECTION. THE ABSTRACT OF BIDS SHOWS THAT A TOTAL OF ELEVEN BIDS WERE RECEIVED FOR FURNISHING THE TESTERS.

B-113845, OCTOBER 15, 1954, 34 COMP. GEN. 180

BIDS - ACCEPTANCE OR REJECTION - DEVIATION FROM ADVERTISED SPECIFICATIONS - NONCONFORMABILITY OF SAMPLES UNDER AN INVITATION FOR BIDS WHICH REQUIRES THE SUBMISSION OF SAMPLES, A BID WHICH COMPLIES WITH THE SPECIFICATIONS AS ADVERTISED BUT IS ACCOMPANIED BY A SAMPLE WHICH FAILS TO MEET SUCH SPECIFICATIONS MUST BE TAKEN AS QUALIFIED BY THE SAMPLE AND IS REQUIRED TO BE REJECTED AS UNRESPONSIVE.

ACTING COMPTROLLER GENERAL WEITZEL TO HEYER PRODUCTS COMPANY, INC., OCTOBER 15, 1954:

REFERENCE IS MADE TO LETTER DATED AUGUST 25, 1954, AND PREVIOUS CORRESPONDENCE, FROM YOUR ATTORNEY, PROTESTING THE AWARD OF A CONTRACT ON JUNE 30, 1952, BY THE ARMY ORDNANCE TANK AUTOMOTIVE CENTER, DETROIT, MICHIGAN, ON A BID OTHER THAN THAT SUBMITTED BY YOU IN RESPONSE TO INVITATION NO. ( IFB) ORD-20-113-52-2623, DATED MARCH 17, 1952.

THE INVITATION INVITED BIDS, TO BE OPENED APRIL 16, 1952, FOR FURNISHING, AMONG OTHER ITEMS, 5,500 LOW-VOLTAGE CIRCUIT TESTERS IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-T-10308 ( ORD), DATED MAY 19, 1950, EXCEPT THAT ALL REFERENCES TO SPECIFICATION JAN-1-6, MENTIONED IN PARAGRAPH 2.1 AND 3.1.13 OF THAT SPECIFICATION, WERE DELETED THEREFROM. HOWEVER, THE INVITATION FURTHER PROVIDED THAT A BID SAMPLE WAS REQUIRED FOR THE ITEM, FOR THE DETAILS OF WHICH BIDDERS WERE REFERRED TO INSTRUCTION SHEET NO. 1 OF THE INVITATION. ON THAT SHEET BIDDERS WERE ADVISED AS FOLLOWS:

BID SAMPLE MUST BE FURNISHED FOR TEST AND EVALUATION.

(C) ITEM BEING FURNISHED AS SAME MUST CONFORM IN EVERY RESPECT TO THE ITEM THE FACILITY INTENDS SUPPLYING TO MEET THE GOVERNMENT REQUIREMENTS.

(D) ANY SAMPLE FAILING IN ANY PORTION OF TESTS WILL BE DEEMED SUFFICIENT BASIS FOR REJECTION.

FAILURE TO COMPLY WITH THE INSTRUCTIONS OF THIS INVITATION FOR BIDS MAY BE CAUSE FOR CONSIDERING A BID NON-RESPONSIVE.

THE ABSTRACT OF BIDS SHOWS THAT A TOTAL OF ELEVEN BIDS WERE RECEIVED FOR FURNISHING THE TESTERS, RANGING FROM A UNIT PRICE OF $37.45, SUBMITTED BY YOU, TO A PRICE OF $177. THE CONTRACT WAS AWARDED TO JOSEPH WEIDENHOFF, INC., THE SEVENTH LOWEST BIDDER, AT ITS BID OF $72 PER UNIT ON THE BASIS THAT SUCH BID WAS THE ONLY ONE OF THE SEVEN LOWEST BIDS WHICH WAS RESPONSIVE TO THE INVITATION. THE OTHERS WERE DETERMINED TO BE UNRESPONSIVE TO THE INVITATION BECAUSE THE SAMPLES SUBMITTED BY THE BIDDERS DID NOT COMPLY WITH THE CONTRACT SPECIFICATIONS, AS SHOWN BY TESTS PERFORMED BY THE DETROIT ARSENAL AND THE ARMY ORDNANCE TANK AUTOMOTIVE CENTER ( OTAC), OR BY OTHER MEANS OF ENGINEERING EVALUATION. A SUMMARY OF THE REPORT OF THE TESTS MADE BY THE PROCURING AGENCY IS CONTAINED IN A MEMORANDUM DATED JUNE 17, 1952, FROM THE OFFICIALS DIRECTLY RESPONSIBLE IN THE MATTER, TO THE CHIEF, TOOLS AND EQUIPMENT EVALUATION BRANCH, PROCUREMENT DIVISION, OTAC, WHICH IS SET FORTH AS EXHIBIT 3, PP. 502-504 OF THE HEARINGS OF THE MILITARY PROCUREMENT SUBCOMMITTEE OF THE SENATE SELECT COMMITTEE ON SMALL BUSINESS, MARCH 5, MAY 4-15, 1953, IN WHICH YOU PARTICIPATED. THE SAMPLE TESTERS SUBMITTED BY HEYER PRODUCTS COMPANY, INC., AND JOSEPH W. WEIDENHOFF, INC., ARE DESIGNATED AS TESTERS A AND C, RESPECTIVELY, AND THE REPORTS WITH RESPECT THERETO ARE SUMMARIZED AS FOLLOWS:

2. LISTED BELOW ARE THE DEFECTS OF EACH OF "A," "C," AND "D" TESTERS;

A. TESTER,"A"

1. TWO OF THE TERMINAL SCREWS COULD BE REMOVED BY HAND ( FIG. 2).

2. ELECTROSTATIC EFFECT WAS VERY BAD ON BOTH METERS. THE METERS DID NOT RECOVER EXCEPT BY BREATHING ON THE METER WINDOWS ( FIG. 20).

3. THE VOLTMETER READINGS WERE MORE THAN 2 PERCENT LOW (OF FULL SCALE DEFLECTION) FROM 9 TO 10 VOLTS ON THE 10-10 VOLT RANGE ( FIG. 15).

4. THE VOLTMETER READINGS WERE MORE THAN 2 PERCENT LOW (OF FULL SCALE DEFLECTION) FROM 90 TO 100 VOLTS ON THE 10-100 VOLT RANGE PRIOR TO TAPPING TO THE METER. THIS CALIBRATION DATA WAS OBTAINED AFTER THE TESTER WAS SUBJECTED TO THE VIBRATION TEST.

5. THE NO. 8 CABLE FAILED THE HIGH TEMPERATURE TEST ( TABLE XII).

B. CODE C TESTER

1. ELECTROSTATIC EFFECT WAS BAD ON BOTH METERS, HOWEVER, BOTH METERS RECOVERED QUICKLY.

2. THE SENSITIVITY OF THE MOVEMENT OF THE AMMETER WAS 39.07 MV. FOR FULL SCALE DEFLECTION; WITH A 3 OHM EXTERNAL SERIES RESISTOR, THE SENSITIVITY WAS 57.45 MV. FOR FULL SCALE DEFLECTION ( TABLE VI).

2. BASED UPON THE TESTS CONDUCTED IN ACCORDANCE WITH THE TEST PROGRAM AND THE AMENDMENTS, THE REMAINING LOW-VOLTAGE CIRCUIT TESTERS ARE LISTED BELOW IN THE ORDER OF OVERALL PERFORMANCE;

A. "C.'

B. "A" AND "D," ETC.

THE TECHNICAL EVALUATION MADE BY OTAC OF THE TEST REPORTS IS CONTAINED IN A MEMORANDUM DATED JUNE 6, 1952, FROM THE CHIEF, TOOLS AND EQUIPMENT EVALUATION BRANCH, PROCUREMENT DIVISION, TO THE CHIEF, TOOLS AND EQUIPMENT BRANCH, PROCUREMENT DIVISION, WHICH IS SET FORTH AS EXHIBIT 4, PP. 514-515 OF THE HEARINGS. THE SAMPLE TESTERS SUBMITTED BY YOU AND WEIDENHOFF WERE EVALUATED WITH RESPECT TO THE TESTS AS FOLLOWS:

A. HEYER PRODUCTS COMPANY, LOW BIDDER, OFFERS THEIR TESTER, MODEL 24005, WHICH IS NOT ACCEPTABLE AS FOLLOWS:

(1)PARAGRAPH 3.1.13 METERS; ORIGINAL CALIBRATION, ACCURACY WAS LOW AND NOT WITHIN PLUS OR MINUS 2 PERCENT ON 10-10 VOLT RANGE BETWEEN 9 AND 10 VOLTS. THE AMMETER MOVEMENT WAS STICKY AT 100 AMPERES ON THE 150-0-500 AMPERE RANGE. BY TAPPING, IT WAS POSSIBLE TO OBTAIN ACCURATE READING. MAJOR.)

(2) PARAGRAPH 3.1.13.2 TRANSPARENT FRONT; THE METERS WERE NOT FREE OF THE ELECTROSTATIC EFFECT. WHEN AN ELECTRICAL CHARGE WAS INDUCED ON THE TRANSPARENT METER FRONT, THE CHARGE DID NOT ,LEAK OFF," WITH THE RESULT THAT POINTERS WERE DEFLECTED AND INSTRUMENTS DID NOT INDICATE TRUE VALUES. ( MAJOR.)

(3) PARAGRAPH 3.1.13.6.1 AMMETER BINDING POSTS FOR INTERNAL SHUNT; TWO TERMINAL BINDING SCREWS WERE REMOVED BY HAND, WHICH IS NOT IN ACCORDANCE WITH SPECIFICATION REQUIREMENTS: "MEANS SHALL BE PROVIDED TO PREVENT THE SCREWS FROM BEING REMOVED FROM THE BINDING POST.' (MINOR.)

(5) PARAGRAPH 4.2 PERFORMANCE TESTS. A. THE VOLTMETER WAS NOT WITHIN CALIBRATION LIMITS OF PLUS OR MINUS 2 PERCENT FROM 90 TO 100 VOLTS ON THE 10-100 VOLT RANGE UPON COMPLETION OF A VIBRATION TEST. FOR OTHER RANGES OF BOTH METERS, ACCURACY WAS WITHIN TOLERANCES ONLY WHEN THESE METERS WERE CONTINUALLY TAPPED. THE AMMETER TEST LEAD FAILED THE HIGH TEMPERATURE TEST OF SPECIFICATION MIL-C-3078 ( SPEC. PARAGRAPH 3.1.15) BY CRACKING OF THE CABLE CENTER SHEATH AND FAILED UNDER THE FOLLOWING HIGH POTENTIAL TESTS. (NOTE: SPECIFICATION MIL-C 3078, HAS LESS RIGOROUS REQUIREMENTS THAN SPECIFICATION AXS-1819, WHICH COVERS THIS TYPE CABLE.)

G. JOSEPH WEIDENHOFF COMPANY, SEVENTH LOW BIDDER, OFFERS THEIR TESTER, MODEL 1120, WHICH IS ACCEPTABLE. THIS UNIT SUCCESSFULLY PASSED ALL REQUIRED TESTS. HOWEVER, IF SUBSTITUTION OF COMPONENTS SUCH AS METERS ARE MADE IN PRODUCTION OF THESE UNITS, IT IS REQUESTED THAT A PILOT MODEL BE SUBMITTED TO THIS OFFICE FOR APPROVAL AND ACCEPTANCE TESTS.

YOU CONTEND THAT THE REASONS GIVEN FOR THE REJECTION OF YOUR BID, NAMELY, THE ENGINEERING DEFICIENCIES IN YOUR SAMPLE TESTER, SET FORTH ABOVE, WERE FLIMSY, ARBITRARY AND CAPRICIOUS. YOU FURTHER CONTEND THAT, SINCE YOU HAD AGREED IN YOUR BID TO MANUFACTURE TESTERS WHICH WERE IN STRICT CONFORMITY TO THE SPECIFICATIONS, NO LEGAL BASIS EXISTED FOR REJECTING YOUR BID AS BEING UNRESPONSIVE TO THE INVITATION IN ANY EVENT. HENCE, YOU STATE THAT YOU WERE, AS THE LOW BIDDER, ENTITLED TO THE AWARD UNDER THE PROVISIONS OF SECTION 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 21, WHICH REQUIRE THAT CONTRACTS OF THE TYPE INVOLVED BE LET ON THE BASIS OF COMPETITIVE BIDDING. CONVERSELY, YOU CONTEND THAT THE CONTRACT ENTERED INTO WITH WEIDENHOFF, WHICH STIPULATES A TOTAL PRICE OF $396,000 FOR THE 5,500 TESTERS REQUIRED TO BE FURNISHED, AS AGAINST THE TOTAL PRICE OF $205,975 FOR WHICH YOU OFFERED TO FURNISH THEM, IS ILLEGAL.

THIS OFFICE HAS RECOGNIZED THE PROPRIETY OF REQUIRING BIDDERS TO SUBMIT SAMPLES IF IT IS DEEMED NECESSARY IN ORDER TO AFFORD PURCHASING OFFICERS AN OPPORTUNITY TO DETERMINE THAT THE ITEM PROPOSED TO BE FURNISHED COMPLIES WITH THE SPECIFICATIONS AS ADVERTISED. ALSO, IT HAS CONSISTENTLY BEEN HELD THAT IF, THROUGH OVERSIGHT, MISINTERPRETATION OF THE SPECIFICATIONS, OR OTHERWISE, THE SAMPLE SUBMITTED WITH THE BID DOES NOT MEET SPECIFICATIONS, THE BID, ALTHOUGH OFFERING IN TERMS TO DELIVER ARTICLES MEETING THE SPECIFICATIONS, MUST BE TAKEN AS QUALIFIED BY THE SAMPLE SUBMITTED, AND REQUIRED TO BE REJECTED ACCORDINGLY. 17 COMP. GEN. 544; 17 ID. 940.

THE RECORD FAILS TO SUBSTANTIATE YOUR CONTENTION THAT THE SAMPLE TESTER SUBMITTED BY YOU WAS MISHANDLED IN ANY WAY PRIOR TO, OR DURING, THE TIME WHEN THE TESTS WERE MADE, OR THAT THE TESTS TO WHICH THE TESTER WAS SUBJECTED WERE NOT FAIRLY CONDUCTED. IT APPEARS, AS POINTED OUT BY MR. DOUGLAS DOW, PRESIDENT AND GENERAL MANAGER OF THE DETROIT TESTING LABORATORY, IN HIS TESTIMONY BEFORE THE SUBCOMMITTEE ON MILITARY PROCUREMENT THAT PROSPECTIVE BIDDERS WERE NOT ADVISED IN DETAIL CONCERNING THE TESTS TO WHICH THEIR BID SAMPLES WERE TO BE SUBJECTED. HOWEVER, AS INDICATED ABOVE, BIDDERS WERE ADVISED THAT THE SAMPLES WERE TO BE TESTED; AND THE TESTS, CONSIDERED AS A WHOLE, DO NOT APPEAR TO HAVE BEEN UNREASONABLE. MR. DOUGLAS DOW, WHO WAS INVITED BY ALL PARTIES CONCERNED TO RENDER AN EXPERT OPINION AS TO WHETHER THE RESPECTIVE SAMPLE TESTERS SUBMITTED BY YOU AND WEIDENHOFF MET THE REQUIREMENTS OF THE SPECIFICATIONS, PLUS THE TEST PROGRAM, TESTIFIED IN SUBSTANCE THAT NEITHER YOUR SAMPLE NOR WEIDENHOFF'S SAMPLE FULFILLED THE REQUIREMENTS. IN THIS CONNECTION, MR. DOW CALLED ATTENTION TO THE FACT THAT OTAC'S REFERRED-TO TECHNICAL EVALUATION REPORT MISREPRESENTED DETROIT ARSENAL'S TEST REPORTS BY STATING IN PARAGRAPH 2 (G) THAT WEIDENHOFF'S TESTER SUCCESSFULLY PASSED ALL REQUIRED TESTS. MR. DOW DIRECTED ATTENTION TO THE FACT THAT WEIDENHOFF'S TESTER DID NOT MEET THE REQUIREMENT AS TO SENSITIVITY OF THE MOVEMENT OF THE AMMETER AS SPECIFIED IN PARAGRAPH 3.1.13.5.1 OF THE SPECIFICATIONS. THIS PARAGRAPH PROVIDED THAT FULL-SCALE DEFLECTION OF THE AMMETER DIAL WAS TO BE 50 MILLIVOLTS; WHEREAS IN PARAGRAPH 2 (B) (2) OF THE TEST SUMMARY, SUPRA, THE SENSITIVITY OF THE MOVEMENT OF THE AMMETER OF THE WEIDENHOFF TESTER WAS SHOWN TO BE ONLY 39.07 MILLIVOLTS FOR FULL-SCALE DEFLECTION.

THUS, IT APPEARS THAT NEITHER YOUR SAMPLE TESTER NOR WEIDENHOFF'S SAMPLE TESTER COMPLIED STRICTLY WITH THE SPECIFICATIONS. HOWEVER, THE TEST SUMMARY INDICATES THAT THE DEFICIENCIES IN THE TWO TESTERS AS REVEALED BY THE TESTS WERE AT LEAST MORE NUMEROUS IN THE CASE OF YOUR TESTER THAN IN THE CASE OF WEIDENHOFF-S. ALSO, THE WEIDENHOFF TESTER WAS RATED IN THE SUMMARY AS FIRST AMONG ALL OF THE SAMPLES TESTED ON THE BASIS OF OVERALL PERFORMANCE IN THE TESTS. NO DOUBT YOU COULD HAVE CORRECTED THE DEFICIENCIES FOUND IN YOUR SAMPLE AND PRODUCED A TESTER MEETING THE REQUIREMENTS OF THE ARMY, IF YOU COULD HAVE BEEN ALLOWED TO DO SO. HOWEVER, THE PROCURING AGENCY WOULD HAVE BEEN WITHOUT ANY AUTHORITY TO ALLOW YOU TO CORRECT SUCH DEFICIENCY AFTER THE BIDS WERE OPENED. PREVIOUSLY INDICATED, THE SAMPLE MODEL WHICH YOU SUBMITTED WAS REQUIRED TO BE CONSIDERED AS AN INTEGRAL PART OF YOUR BID. YOU WERE ADVISED IN THE SPECIFICATIONS THAT IT WOULD BE SO CONSIDERED. SOME OF THE DEFICIENCIES IN YOUR TESTER DISCLOSED BY THE TESTS WERE CONSIDERED OF A MAJOR CHARACTER, AS INDICATED IN THE TECHNICAL EVALUATION MADE BY OTAC, AND TO HAVE PERMITTED YOU TO CHANGE OR MODIFY THE SAMPLE UNDER THE CIRCUMSTANCES WOULD HAVE AMOUNTED TO ALLOWING YOU TO VARY YOUR PROPOSAL AFTER THE BIDS WERE OPENED. AS STATED IN 17 COMP. GEN. 544, TO PERMIT PUBLIC OFFICERS TO ACCEPT BIDS NOT COMPLYING IN SUBSTANCE WITH ADVERTISED SPECIFICATIONS OR PERMIT BIDDERS TO VARY THEIR PROPOSALS AFTER THE BIDS ARE OPENED WOULD SOON REDUCE TO A FARCE THE WHOLE PROCEDURE OF LETTING PUBLIC CONTRACTS ON AN OPEN COMPETITIVE BASIS. THE STRICT MAINTENANCE OF THE RULES DESIGNED TO INSURE COMPETITIVE BIDDING IS INFINITELY MORE IN THE PUBLIC INTEREST THAN OBTAINING AN APPARENTLY PECUNIARY ADVANTAGE IN A PARTICULAR CASE.

THIS OFFICE, AS IN THE CASE OF MR. DOUGLAS DOW, FEELS THAT BIDDERS SHOULD HAVE BEEN PROVIDED WITH MORE INFORMATION IN THE PRESENT INVITATION RELATIVE TO THE NATURE OF THE TESTS TO WHICH THE SAMPLE TESTERS WERE TO BE SUBJECTED. HOWEVER, BIDDERS WERE ADVISED THAT THE SAMPLES WOULD BE SUBJECTED TO TESTS, AND THE TESTS WHICH WERE GIVEN APPEAR, AS A WHOLE, TO HAVE BORNE A REASONABLE RELATIONSHIP TO THE REQUIREMENTS OF THE SPECIFICATIONS. HENCE, THERE WOULD NOT BE ANY BASIS FOR CONCLUDING THAT YOUR BID WAS REJECTED BECAUSE OF REQUIREMENTS NOT SET FORTH IN THE SPECIFICATIONS.

SINCE THERE WERE SIX BIDDERS BESIDES HEYER PRODUCTS COMPANY, INC., WHOSE BIDS, ALTHOUGH LOWER THAN WEIDENHOFF-S, WERE REJECTED BECAUSE THEIR SAMPLE TESTERS FAILED TO PASS THE TESTS, THERE WOULD APPEAR TO BE NO BASIS FOR YOUR CONTENTION THAT THE CONTRACT WAS AWARDED TO WEIDENHOFF AS AN ACT OF RETALIATION FOR MR. HEYER'S CRITICISM OF ARMY PROCUREMENT METHODS AT THE HEARINGS HELD BY THE SENATE SELECT COMMITTEE ON SMALL BUSINESS ON APRIL 28, 1952, IN CONNECTION WITH THE INVESTIGATION OF AN AWARD OF A PREVIOUS CONTRACT FOR LOW-VOLTAGE CIRCUIT TESTERS TO JOSEPH WEIDENHOFF, INC. NOR DOES THE RECORD OTHERWISE INDICATE THAT THE DECISION TO AWARD THE CONTRACT TO WEIDENHOFF WAS DUE TO ANY IMPROPER MOTIVES ON THE PART OF THE PROCUREMENT OFFICIALS INVOLVED, OR THAT IT WAS ARBITRARY OR CAPRICIOUS. THERE IS NO EVIDENCE THAT WEIDENHOFF RECEIVED ANY ADVANCE INFORMATION NOT DISCLOSED TO OTHER BIDDERS WHICH ENABLED IT TO SUBMIT A SAMPLE TESTER MEETING THE REQUIREMENTS OF THE ARMY. WITH RESPECT TO THE ISSUANCE OF THE NOTICE OF TERMINATION OF THE WEIDENHOFF CONTRACT AND THE SUBSEQUENT RETRACTION THEREOF BY THE DEPARTMENT OF THE ARMY, IT APPEARS THAT ON AUGUST 25, 1952, FOLLOWING A MEETING BETWEEN YOU AND YOUR ATTORNEY AND THE UNDER SECRETARY OF THE ARMY, EARL JOHNSON, THE DEPUTY CHIEF OF THE PROCUREMENT DIVISION OF THE OFFICE, ASSISTANT CHIEF OF STAFF, G-4, AND MR. CLIVE DUVAL, A SPECIAL ASSISTANT TO MR. JOHNSON, AT WHICH YOUR COMPLAINTS CONCERNING THE AWARD OF THE INSTANT CONTRACT WERE DISCUSSED, MR. DUVAL ADDRESSED A MEMORANDUM TO THE ASSISTANT SECRETARY OF THE ARMY RECOMMENDING THAT THE WEIDENHOFF CONTRACT BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT AND THAT THE PROCUREMENT BE READVERTISED WITH CLEARER SPECIFICATIONS UNLESS THE ORDNANCE DEPARTMENT COULD SUBMIT CONVINCING EVIDENCE THAT SUCH ACTION WOULD RESULT IN GRAVE DETRIMENT TO THE DEFENSE EFFORT. AT THE UNDER SECRETARY'S DIRECTION, THE MEMORANDUM WAS TRANSMITTED TO THE ASSISTANT CHIEF OF STAFF, G-4. HOWEVER, FOLLOWING A REVIEW OF THE MATTER BY THE CHIEF OF STAFF, G-4, THE LATTER OFFICIAL AND THE CHIEF OF ORDNANCE RECOMMENDED THAT THE CONTRACT NOT BE TERMINATED ON THE GROUND THAT "THE COST OF TERMINATING THE WEIDENHOFF CONTRACT WOULD BE FROM $20,000 TO $50,000 AND WOULD ENTAIL APPROXIMATELY 6 MONTHS' DELAY IN THE PLACEMENT OF PROCUREMENT OF THIS CRITICAL ITEM WHICH IS NOW IN A DUE- OUT STATUS.' BY MEMORANDUM OF SEPTEMBER 19, 1952, MR. DUVAL ADVISED THE ASSISTANT CHIEF OF STAFF, G-4, THAT THE ASSISTANT SECRETARY HAD REFUSED TO APPROVE THE LATTER'S RECOMMENDATION "AT THIS TIME," AND REQUESTED THAT THE MATTER BE REVIEWED ONCE AGAIN. BY LETTER OF SEPTEMBER 24, 1952, THE ASSISTANT CHIEF OF STAFF, 6-4 ADVISED THE CHIEF OF ORDNANCE THAT THE CONTRACT SHOULD BE TERMINATED "AS DIRECTED" BY THE ASSISTANT SECRETARY. THE CONTRACTING OFFICER SERVED NOTICE OF TERMINATION OF THE CONTRACT ON WEIDENHOFF BY LETTER OF OCTOBER 30, 1952, ON THE BASIS OF DEFAULT, FOR DELAY IN DELIVERIES. THE PROCEEDINGS TO TERMINATE THE CONTRACT WERE WITHDRAWN BY ORDER OF THE DEPUTY UNDER SECRETARY OF THE ARMY ON NOVEMBER 5, 1952, FOR REASONS TESTIFIED TO BY HIM BEFORE THE SUBCOMMITTEE ON MILITARY PROCUREMENT (P. 72 OF HEARINGS) AS FOLLOWS:

KNOWLEDGE OF THIS ACTION REACHED ME ON NOVEMBER 5, AND I IMMEDIATELY ORDERED THAT PROCEEDINGS TO TERMINATE THE WEIDENHOFF CONTRACT BE STOPPED. I THEREUPON ADVISED MR. JOHNSON OF MY ACTION, AND OF THE REASONS WHY I HAD TAKEN IT, AND FOUND HIM IN COMPLETE AGREEMENT.

MY REASONS FOR TAKING THIS ACTION WERE: (A) THAT THE ORIGINAL PROCUREMENT ACTION HAD BEEN CONDUCTED WITHIN THE FRAMEWORK OF EXISTING PROCEDURES, HAD PASSED THROUGH ALL OF THE NORMAL REVIEWS USED AT ORDNANCE TANK-AUTOMOTIVE CENTER, AND REPRESENTED THE BEST JUDGMENT OF THOSE RESPONSIBLE FOR PROCUREMENT OF THIS TYPE OF MATERIAL; (B) THAT A TERMINATION FOR DEFAULT WOULD BE UNSOUND AND LIKELY TO BE UPSET UPON APPEAL TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS.

MOREOVER, SUCH A TERMINATION WOULD BE UNFAIR; ALMOST IMMORAL, IN VIEW OF THE MANY ARMY CONTRACTS EQUALLY OR MORE DELINQUENT IN TERMS OF DELIVERY WHICH THE ARMY, AS A MATTER OF REGULAR PRACTICE, DOES NOT TERMINATE; (C) THAT TERMINATION FOR CONVENIENCE WOULD COST A SUBSTANTIAL AMOUNT OF MONEY, ESTIMATED AS HIGH AS $50,000.

(D) THAT THE CHIEF OF ORDNANCE HAD REPORTED THAT THIS ITEM WAS IN A DUE- OUT CONDITION (I.E., IT WAS OUT OF STOCK, AND REQUISITIONS WERE ON HAND WHICH COULD NOT BE FILLED), AND THAT A TERMINATION OF THE WEIDENHOFF CONTRACT WOULD INVOLVE A DELAY OF FROM 3 TO 6 MONTHS IN ACCOMPLISHING DELIVERY FROM ANOTHER SOURCE OF SUPPLY. * * *

THE COUNSEL FOR THE SUBCOMMITTEE STATED (P. 4 OF HEARINGS) THAT ON OR ABOUT OCTOBER 3, 1952, MR. CLIVE DUVAL, ASSISTANT TO THE UNDER SECRETARY OF THE ARMY, ADVISED YOUR ATTORNEY THAT THE "AWARD" TO WEINDENHOFF HAD BEEN TERMINATED IN THE BEST INTERESTS OF THE GOVERNMENT ON THE GROUNDS THAT THE SPECIFICATIONS WERE INSUFFICIENT, AND THAT THE REQUIREMENTS WOULD BE READVERTISED. THE COUNSEL ALSO STATED THAT, ON OR ABOUT THE SAME DATE, THE CONSULTANT ON SMALL BUSINESS, ASSIGNED TO THE OFFICE OF THE ASSISTANT SECRETARY OF THE ARMY, ADVISED THE SENATE SELECT COMMITTEE ON SMALL BUSINESS THAT THE CONTRACT "WAS BEING" TERMINATED AND THAT THE REQUIREMENTS WOULD BE READVERTISED. IT APPEARS THAT NEITHER YOUR ATTORNEY NOR THE COMMITTEE RECEIVED ANY FURTHER INFORMATION FROM THE DEPARTMENT OF THE ARMY RELATIVE TO THE MATTER UNTIL ABOUT JANUARY 26, 1963, WHEN THE COMMITTEE LEARNED, THROUGH INQUIRY, THAT THE CONTRACT HAD NOT, IN FACT, BEEN TERMINATED, BUT THAT PRODUCTION HAD BEEN GOING FORWARD THEREUNDER AND DELIVERIES WERE SCHEDULED TO BE COMPLETED ON OR ABOUT APRIL 15, 1953. THE DEPUTY UNDER SECRETARY OF THE ARMY STATED (PP. 72-73 OF HEARINGS) THAT THE FAILURE OF THE DEPARTMENT TO ADVISE THE INTERESTED PARTIES OF THE FINAL ACTION TAKEN IN THE MATTER WAS DUE TO THE FACT THAT THE TWO INDIVIDUALS IN THE OFFICE OF THE ASSISTANT SECRETARY WHO HAD CONCERNED THEMSELVES WITH THE MATTER AT THE TIME OF THE DECISION TO TERMINATE WERE NO LONGER IN THE EMPLOYMENT OF THE GOVERNMENT AT THE TIME THE DECISION TO REVOKE THE TERMINATION WAS MADE, AND NONE OF THE PEOPLE WHO PARTICIPATED IN SUCH DECISION KNEW OF THE FACT THAT THE EARLIER DECISION TO TERMINATE HAD BEEN MADE KNOWN TO ANYONE OUTSIDE OF THE DEPARTMENT OF THE ARMY.

THUS, WHILE THE DEPARTMENT OF THE ARMY WAS CLEARLY REMISS IN FAILING TO NOTIFY THE INTERESTED PARTIES OF ITS DECISION NOT TO TERMINATE THE CONTRACT, SUCH DECISION APPEARS TO HAVE BEEN MADE IN GOOD FAITH. COURSE, THE UNDER SECRETARY'S QUALIFIED INSTRUCTION TO TERMINATE THE CONTRACT "FOR THE CONVENIENCE OF THE GOVERNMENT" (A RIGHT RESERVED TO THE LATTER IN CLAUSE 23 OF THE GENERAL PROVISIONS OF THE CONTRACT UPON THE PAYMENT OF CERTAIN COSTS) WAS BASED UPON THE ASSUMPTION THAT A VALID CONTRACT HAD BEEN ENTERED INTO WITH WEINDENHOFF. WHILE AS A RESULT OF MR. DOW'S TESTIMONY IT NOW APPEARS THAT THIS MAY HAVE BEEN AN ERRONEOUS ASSUMPTION, IT FURTHER APPEARS THAT THE DETERMINATION THAT WEIDENHOFF'S SAMPLES SUCCESSFULLY PASSED ALL REQUIRED TESTS ALSO WAS MADE IN GOOD FAITH. THEREFORE, SINCE THE GOVERNMENT, THROUGH ITS RESPONSIBLE OFFICIALS, ELECTED TO PROCEED WITH THE CONTRACT ON THE BASIS OF SUCH DETERMINATION AND THE CONTRACT HAS NOW BEEN PERFORMED, THIS OFFICE WOULD NOT BE WARRANTED IN QUESTIONING THE LEGALITY OF THE PAYMENTS MADE TO WEIDENHOFF AT THE CONTRACT PRICE.

AT THE HEARINGS BEFORE THE SUBCOMMITTEE, MR. HEYER BROUGHT OUT THE FACT THAT HEYER PRODUCTS COMPANY, INC., IS A SMALL BUSINESS CONCERN WITHIN THE MEANING OF SECTION 2 (B) OF THE ARMED SERVICES PROCUREMENT ACT, 62 STAT. 21, AND THAT OTAC'S PRACTICE OF REQUIRING PREAWARD SAMPLES OF THE PRODUCT TO BE MANUFACTURED IN A LARGE PERCENTAGE OF ITS PROCUREMENTS WORKED TO THE DISTINCT DISADVANTAGE OF SUCH CONCERNS NOT ONLY BECAUSE OF THE EXPENSE INCIDENT TO MAKING HAND-MADE MODELS SUCH AS THE ONE SUBMITTED BY HEYER PRODUCTS IN THE PRESENT INSTANCE--- WHICH APPEARS TO HAVE COST $7,000--- BUT ALSO BECAUSE THEY FREQUENTLY HAVE TO COMPETE WITH A CONCERN WHICH HAS BEEN A PREVIOUS SUPPLIER OF THE ITEM AND IS IN A BETTER POSITION TO FURNISH AN ACCEPTABLE SAMPLE WITHIN THE TIME ALLOWED THAN A NEW PRODUCER. MR. HEYER ALSO POINTED OUT THAT REQUIRING THE SUBMISSION OF PREAWARD SAMPLES OFTEN WORKED TO THE DISADVANTAGE OF THE GOVERNMENT BY LESSENING COMPETITION IN THAT MANY PROSPECTIVE NEW PRODUCERS REFRAINED FROM BIDDING IN SUCH CASES BECAUSE THEY WERE UNWILLING, OR COULD NOT AFFORD, TO INCUR THE EXPENSE INCIDENT TO FURNISHING A SAMPLE ON THE MERE CHANCE THAT THEY WOULD BE THE SUCCESSFUL BIDDER.

THE POINTS MADE BY MR. HEYER WITH RESPECT TO THE FURNISHING OF PREAWARD SAMPLES ARE SOUND AND HAVE BEEN SO RECOGNIZED BY THE DEPARTMENT OF THE ARMY. BY LETTER OF MAY 9, 1954, THE UNDER SECRETARY OF THE ARMY, IN REPLYING TO A REQUEST FOR A REPORT IN THE PRESENT MATTER, ADVISED THIS OFFICE THAT THE CHIEF OF ORDNANCE WOULD SHORTLY ISSUE A STATEMENT OF POLICY TO BE FOLLOWED IN HIS DEPARTMENT WITH REGARD TO REQUIRING SAMPLES IN CONNECTION WITH AUTOMOTIVE TOOL AND EQUIPMENT PROCUREMENT TO THE EFFECT THAT (A) PREAWARD SAMPLES WERE NOT TO BE REQUIRED UNLESS ABSOLUTELY NECESSARY, AND THE FURNISHING OF POST AWARD, OR PREPRODUCTION SAMPLES, WAS TO BE ENCOURAGED, AND (B) IN THOSE INSTANCES WHERE IT WAS ABSOLUTELY ESSENTIAL TO REQUIRE PREAWARD SAMPLES, A PREBID SAMPLING PROCEDURE, I.E., A QUALIFIED PRODUCT, OR VARIATION OF THE QUALIFIED PRODUCTS THEORY, WAS TO BE UTILIZED, WHICH WOULD PERMIT BIDDERS TO MAKE NECESSARY CHANGES IN THEIR PRODUCTS PRIOR TO BIDDING. THE UNDER SECRETARY FURTHER ADVISED THAT A NEW SERIES OF SPECIFICATIONS DRAFTED BY ORDNANCE INCLUDE THE TESTS TO BE PERFORMED ON ITEMS BEING PROCURED.